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Carly Fiorina Destroys Katie Couric on Climate Change
It’s from May but — just in case you missed it — it’s here for your viewing enjoyment:
Published in Politics, Science & Technology
I am realistic – value is a very nebulous thing, because it is a combination of o many factors. Carly’s contribution to HP may have been quite minimal overall in terms of actual management – but the Compaq acquisition was a major decision made by the CEO, and so she can rightly be judged by it.
Stock market value is often not strongly linked to underlying value – no argument there. But it still matters that shareholder perceptions at the time were that Carly was a loser. It means that even if she was adding value, then she was not good at showing that she was. And I think we all agree that perceptions are a big part of being a successful president.
I am not claiming it is airtight. But let’s back up a bit: even if Carly’s HP had been merely average, it would not be that impressive a credential to become President. And she was below average.
On the other hand, if she had built enormous value, we would not be having this discussion.
Moving the goalposts now
You have yet to show this. From the total return data, it appears she was at least average, as measured by shareholder return. If her decisions were what put HP on track to outperform subsequently, then she deserves her share of credit for that, which would make her better than average.
I’m not a Carly booster, and when this discussion started, I had amorphous negative impressions of her tenure as CEO. But the more I look into claims about how bad she was, the more exaggerated those claims seem.
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I am explaining that there IS a reasonable argument that the share prices from the day of announcing her appointment until the day her firing was announced are indeed relevant. They are not, as you point out, an ironclad argument, since a CEO could, in principle, do something while in office that turns out to be wonderful (or awful) with the benefit of more hindsight.
Carly Fiorina, using share value alone, harmed her shareholders. If you want to extend the dates in either direction, there needs to be an argument that something she did really was marvelous.
From my perspective, HP used to be a pretty creative and dynamic company. Carly continued its long, slow slide. I am not speaking only from public information: my company had dealings with HP and HP labs at the time, and the company did not meet its former reputation.
I have not seen comparable total return data; I did not easily find a source.
How do you see outperformance? HP has had ups and downs since then, but has not been a stellar performer. At or below the Dow, as far as I can see.
iWe, as far as measuring HP’s performance, you’ve taken issue with 4 main points:
1. Where to start measuring
2. How to measure
3. Where to stop measuring
4. The appropriate benchmark for comparison
It will take me a few comments to go through these, since you’re being stubborn, as usual. ;-)
Let’s start at the end.
4. Appropriate benchmark
There’s a lot variability from one industry to another, so it’s most appropriate to compare to companies in the same industry. That means the Dow is a poor choice for comparison. We’d like to compare to large tech companies.
Additionally, it’s most illustrative to compare against an index or basket of similar companies. That removes idiosyncratic variation in how the peers are managed. Indeed, there is good theory to support the idea that the naive alternative to investing in a particular company is not a different specific company, or cash, but an index fund. (I’m not going into that theoretical background here.)
Here is a timeseries comparison of HPQ (total return) vs. Bloomberg’s IT subset of the S&P 500 Index, for the period 1999-2007. That gives you a comparison against large tech companies. I’ve also included the NASDAQ 100 (the top-sized 100 companies on NASDAQ) for comparison.
You can see that HPQ tracks other large tech companies very closely — through both the bubble and the crash — until it outperforms starting in early 2005.
For comparison, here are a couple of other large tech firms (IBM and MSFT) and with another arbitrary start date (1998). They, too, follow the NASDAQ 100 pretty closely, though they rose less during the bubble and fell less when it popped.
3. Where to stop measuring
You can see from these charts that HPQ took off after Carly left. Was it because her successor was finally able to do what she couldn’t? Or because the decisions she made as CEO positioned the company for a breakout? I don’t know enough to say.
2. How to measure
I’ve been using total return data, because that’s the return shareholders get. Over days or weeks or even months, price volatility will dominate. But when measuring performance over years, you ignore dividends at your peril. Drawing conclusions from price data because that’s all you have is like looking for your keys under the streetlamp because the light is better there.
I’ve taken the data from Bloomberg, because that’s a source I know how to use. But as far as I can tell, you can get total return data from free online sources (such as here).
(continued)
(cont.)
1. Where to start measuring
If you look at the first chart above, you’ll note that HP has a “blip” in mid-1999. Before and after that, it tracks the benchmarks. I don’t know what caused that blip (a news search could turn up more; it could be rumors of the new CEO). Regardless, it would seem to be a transitory phenomenon rather than a sustained one. You know the old adage — buy the rumor, sell the news.
If you start measuring from middle of that blip, HP’s performance will be depressed relative to its peers. iWe, this is a second big cause of the negative relative performance you are seeing in your calculations.
You can argue that Carly should have maintained that price advantage when she joined HPQ in the middle of that blip. However, I’m not going to hold such reversion to the mean against her. You’d need to believe that she has 100% impact on the company’s returns from the first minute of her first day. I’d be willing to cut a new CEO the slack of at least a month or two.
OK, SoS, you have convinced me of this much:
During her tenure, Carly was within a standard deviation of average for CEOs. She was not a stunning success, nor was she an abysmal failure, and HP has done well since then.
Once again, Ricochet changes my mind!
SoS: Thank you.
Thanks SoS! I’ve been reading.
If this was a click-bait webzine we’d get a headline, “SoS destroys iWe over Carly Performance”.
;-)
Tsk, tsk.
I think iWe got it right in #128: There’s nothing here to suggest a record of shareholder returns much different than average — either good or bad.
Boom! Carly outperformed Couric, which is not within a standard deviation of GOP returns.
In Judaism, we have a principle: Argue for the sake of heaven.
As long as the goal of a discussion is to find the truth (instead of self-aggrandizement), then the argument is worthy. Once it becomes about the person making the argument, then it is no longer legitimate. Sort of a variation on the CoC: Play the ball, not the pitcher.
SoS and I have been engaged in this – and he was right. We are both interested in making a good assessment of Carly, and I, for one, am relieved to be proven wrong, because it makes me more able to vote for Carly for President.
But I can take my lumps, if it makes y’all feel better. SoS creamed me.
[Editorial note: The editors have declared this comment of the week.]
I believe, when we’re talking about water use by commercial solar array farms (found in the U.S. in the desert Southwest, for example), we’re talking about this:
I believe I heard ten gallons a second?
That’s “minute” in both senses. They also say 80 linear feet per minute.
I believe the other post had a very small number for cleaning PV panels or thermal-solar mirrors.
I was surprised to hear Carly cite water use as her main criticism of solar arrays. The real waste from solar arrays is land. Just looking at that video, I couldn’t help thinking what an environmental disaster those solar arrays must be for local wildlife and habitat destruction.
I think the word “mensch” may be appropriately applied here. Very worthily applied.
Oh, yes! And the same is true for wind farms. Thousands and thousands of acres of natural or arable land for unsightly, less reliable, less energy-dense sources of power. It’d be a joke except it’s so stinking ugly and useless. All for environmentalists’ moral vanity.
Can you figure water usage for a large array like Aqua Caliente?
If you follow the R&D wires though, you can’t help but feel very optimistic about solar for the future. They keep making (in the lab, mind you) more efficient and cheaper cells.
I saw an absolutely devastating takedown of solar power recently.
The author was the originator of the famous X Prize.
Much more detail, and original papers, here.
Doesn’t convince me (haven’t perused the papers). We are going to put solar on buildings and other infrastructure in a big way here starting in the next decade, I wager. We will find a way to mass produce the stuff too.
yes, but she also said, that in many of the places where solar works best, the water resources are a challenge. I thought her response fit into her presentation of full disclosure and comparison of the true costs of energy sources, which include dollars, resources and environment.
PS. I appreciate the information very much though. Keep on top of this stuff, it can be real sobering. Thanks.
Creamed iWe on toast, the breakfast of champions. :)
I know I could not have made sense of those charts. Thanks to both of you for accepting that challenge and digging down into the data.
Please peruse them. The math is inexorable. Solar power is a massive whopping failure, and can never be a primary source of power for the grid.
A few key parts:
To follow up, I think the real challenge may be in storing all the energy solar will be able to collect ultimately. Solar cells will win out in the end because it is that promising, only we may be limited by energy storage. We need energy on tap at night.
The flipped of the solar argument, of course, is to point out that we now have an effectively infinite supply of natural gas and oil, thanks to shale/fracking technology, all at prices that relegate solar and wind to the economic fringe for as far as the eye can see. Even if they were quite cheap and highly efficient!
They really are not promising at all, even if they were near their theoretical maximum efficiencies of 55% or so. Please follow the math. Sunlight is simply too energy-light compared to any of the competition.
And the associated costs (inverters, storage, wiring, and enormous maintenance/cleaning hassles) make it all much worse.
I love data, thanks. Only you have to be careful. Solar radiation = 0.0000015 joules per meter^3? Earlier the analysis said 37.5 watts per meter^2. A watt = joule/sec. These numbers are entirely inconsistent.
Now take the last number. How many square meters is the sun-facing roof of your house? Say 15’x40′ = ~65 m^2. Then multiply by ~40 watts/m^2 yields ~3000 watts from your roof, average over the year, day and nite. Well the average home uses considerably less than that a day.
If these solar sheets can be mass produced and made cheap, and put on buildings and homes, what keeps this from taking off? Energy density is highly relevant when you have to transport fuel, but doesn’t seem relevant for this application.
BUT, storage is critical. That is what is limiting I believe…