Friday, June 13, 2014

Strategizing From The View of Lloyd Blankfein

updated at 18:18 hrs

It is always interesting to listen and learn how other strategists manage their major strategic decisions.

Lloyd Blankfein, Goldman’s current chief executive, loves to tell people that he spends “98 percent of my time thinking about 2 percent probabilities."   ... It becomes the alpha priority especially in the area of managing risk in different situations. 

In your competitive terrain, where do you think that 2% is located at ?

Do you think that you can capitalize on the 2% before your competition can?

Q: Why do you think the 2% is focused on?
A: The 2% depicts whether the best case or the worst case scenario would happen at all.

The Charlie Rose View
This past Tuesday night, I saw a superb Charlie Rose interview with Lloyd Blankfein.   It revealed the strategic mindset of Mr. Blankfein in regards to how he strategizes from a top-bottom view..

Lloyd Blankfein called himself "a highly functional paranoid" on Charlie Rose last night.   
"...when the phone rings too late at night or too early in the morning I'm going, "Oh, my God, what happened?"
He continued: "...I spend about -- I have the unhappy life of having to spend about 98 percent of my time worried about the 2 percent worst contingencies." 
Here's a partial transcript: 
Lloyd Blankfein: Well, I'm in the risk management business, so I don't take it for granted that I can see behind -- I don't think I can see four inches into the future.  I'd say that most of my --
Charlie Rose: [laughs] Yeah, but your firm has a reputation of being pretty good at understanding the future and being able to make some analysis as to about what risks to take.
Lloyd Blankfein: Well, I'll confess to you that what I think we aspire to is less foresee the future and more be a great contingency planner because -- and sometimes you contingency plan really well and you can respond very fast to what's happening because you thought through all the possibilities, you can get off the mark so quickly it looks like you false started, it looks like you anticipated the start when all you've really done was listen so closely and knew what you were going to do that you got off the mark quickly.  I think it's hard enough to -- I think it's hard enough to predict the present.  You know, think about it, perspective, it's very hard to step out of your context and see what is happening.  I have views about the future but I will tell you we're not in the – you wouldn't be a very good risk manager if you let what you think was going to happen have too great an influence on what you plan for and protect it against.  What we really do is we really contingency plan, what might happen, what could happen.
Charlie Rose: What is your core competence?
Lloyd Blankfein: Personally?
Charlie Rose: Yes.
Lloyd Blankfein: You know, I think I am -- I think I have -- I am a highly functional paranoid.
Charlie Rose:[laughs]
Lloyd Blankfein: And if I'm -- if I've taken some -- if I've overstated [unintelligible] highly functional part, I'm sure I'm a paranoid.
Charlie Rose: [laughs] Paranoid about what?
Lloyd Blankfein: Well, I have to worry about stuff, you know, every -- listen, when the phone rings too late at night or too early in the morning I'm going, "Oh, my God, what happened?"
Charlie Rose: "I don't want to answer it."
Lloyd Blankfein: "What is somebody --" no, I have to answer. And, in fact, if it stopped ringing I'd call everybody I knew at work to find out what I missed.
Charlie Rose: [laughs]
Lloyd Blankfein: No, I'm -- you know, I spend about -- I have the unhappy life of having to spend about 98 percent of my time worried about the 2 percent worst contingencies.
Perhaps that's why sometimes he prays for a rainy weekend so he can just lie on the couch.

Comments From The Compass Desk
There are many ways to perform scenario modeling. I preferred to use the "Temple Victory" process.

“Before the contest, the successful strategists resolve in their operations room (temple) that they will be victorious, have determined that the majority of factors are in their favor. … If those who find that the majority of factors favor them, will be victorious.  … When observing from this viewpoint, victory and defeat will be apparent.” 
- Art of War 1 (Paraphrased from the Sawyer's translation) 

Is it that simple?

The real challenge is knowing what factors are in play and the mathematics behind it.  ...

The Li Quan Perspective
"Those who excel in warfare contend for advantage with others only after determining through temple calculations that they will be successful. Attacking the rebellious and embracing the distant, toppling the lost and solidifying the extant and uniting the weak and attacking the benighted are all manifestations.  The interior and exterior becoming estranged, as in the case of the Shang and Chou armies, is what is referred to as having determined victory through temple calculations before engaging  in combat.  
According to T'ai-yi Tun-chia assessment method, anything above sixty a majority, anything below sixty is  a minority.  ... In all these  cases, victory and defeat are easily seen. "   
Li Quan's  T'ai-pai Yin-ching

Based on the "completeness" of one's assessment, the successful strategists determined the strategic efficiency of their situation and decides whether it is possible to prevail in any specific contest.

#  #  #

No comments: