This thread is about *relatively common* business practices that are clearly -EV. I want to discuss them, ask questions about them, and see if we can all learn something.

I'll go first.

I work in the refrigerated trucking industry mostly and some trucking companies will attempt to save money on gas by setting their reefer units (laugh it up... it stops being funny pretty fast) on 'cycle' instead of 'continuous'. This means that instead of maintaining the temperature of the load the trailer is operating more like the oven in your kitchen and switching on and off in a range.

This seems +EV because 994/1000 times it works out and you save 25 bucks. It's actually massively -EV because those 6 times it doesn't work cost 5k+ (and the top possible loss is literally the wholesale value of the load).

I've seen like 5 trucking companies get put out of business by this. People still do it.

What do you guys see people doing at your job?

Maybe this doesn't fit but I see small businesses spending thousands of dollars and 100+ yearly manager hours making sure everything is perfect in their books to the cent. To me, that's insane. The last 1% of income accuracy cost thousands of dollars and dozens of hours for near zero return. You're way better off taking a slightly looser approach and just getting the big stuff right (major purchases, wages, rents, etc) and ignoring or simply making up the minutia. Mental and entrepreneurial energy is finite and it should be spent on necessities and the highest return activities.

It absolutely fits. I've seen it a lot myself. And a lot of the time while they are straining that proverbial gnat they are missing multiple elephants.

As an entrepreneur it's ok to take a second and just observe what is going on. You don't have to be busy 100% of the time. If there are no major fires burning take that valuable moment to do something that helps you deal with the massive amount of stress you're probably under. Maybe spend that time thinking about the big picture?

I've seen this in plenty of public companies. Buy back stock, then stock crashes due to crisis, but they still have a rock solid balance sheet. And is now trading at a cheap PE. They stop buying back shares (because they want to 'wait things out a bit'). Then stock goes up again, and buybacks continue.

They want to reward shareholders with buybacks, but don't understand the basic principles behind it.

I guess in general just bad capital allocation I guess. It seems like a relatively simple thing to figure out. Try to do buybacks when the stock looks cheap, yet far too few managers really think intelligently about this, even though it would make themselves richer as well.

I think too many people think that buybacks are -ev when the stock could go down further. But when stock is going up, they think stock will go up further, and they should buy back shares now before it goes up further.

Not sure if it fits, because it is not an operational thing.

edit: ironically too often I see dividends being continued when they actually shouldn't. Because then share price will crash, and that is 'bad'. Even though not cutting divvy will hurt them far more in the long run.

Yeah the incentives CEO's and boards have are hilariously bad. I don't think I've ever looked at a company do something super wealth destroying like the above without it being easily explained by the terms in someone's contract.

Commercial real estate sales brokers always put together glossy hard copy packages that cost thousands of dollars to print, send them to everyone in town, then inevitably get asked to just send a ****ing PDF. This is thousands wasted on every transaction.

I always wondered about the effectiveness of mailer campaigns in general. When I worked in car dealerships it seemed like the only ones that drove in traffic were usually misleading and those type of customer interactions aren't my strong suit. Never seemed to work THAT much better for other salespeople either.

This is especially stupid because buyers are basically all institutional/sophisticated and will simply load the financials into a model. The glossy sales package is completely worthless.

Some companies do that with their annual reports too. Some stupid ***** laggy fancy thing that is impossible to browse and search things in. Or PDF files loaded up with crap that make them laggy to browse.

Casinos won't let you sit down at a blackjack table mid-shoe. Even if they are occasionally hit by blackjack teams, they'd have a higher hourly by letting people sit immediately.

At lower stakes I agree. At higher stakes not so much.

Clients want 'em, its like a trophy. I get em all the time and its just totally wasted on me.

Don't companies allocate money for buybacks from their earnings and don't stocks generally decline due to earnings being unexpectedly lower?

Sarbox for publicly traded companies and BS accounting can sink a private company that is looking to go public or seeking a buyout.

I'm not talking about multi million dollar firms.

Annual Performance Review Systems (PRS).

At best a well-intentioned attempt to appropriately reward and incentivise workers that's ultimately doomed to do neither, due to meaningless and/or ambiguous objectives and/or corrupt senior staff rewarding friends; at worst a dishonest means of getting people to take on more work for less reward by deliberately putting them into direct competition for limited PRS rewards with their colleagues.

In both cases extremely costly in terms of total company hours spent in return for very dubious (or non-existent) benefits.

Yeah performance reviews are, at best, an enormous waste of time.

I think from a small business perspective the biggest mistake I see is being penny wise and pound foolish, as some have already alluded to. Also not understanding the value of guest retention, that one irks me a great deal.

From a corporate standpoint, the biggest waste of $ is most certainly in labor. Too much executive leadership that is non-value add and not enough employee retention efforts. At a high level, recruiting/promoting, relo expenses, sign on bonuses, over-time for short handed teams, lost efficiencies from continued rotations off of teams, etc. These are huge huge costs and it blows my mind that corporations dont focus on this more.

I work in corp. finance fwiw

I work in legal.

Many companies insisting on receiving purchase orders or legal correspondence by fax only, and not for HIPPA compliance or out of some esoteric federal compliance, but rather only because of old people who insist on paper. International faxes go for $2-$4 a page, but companies pay them anyway.

Refusing to hire more staff to expand business when it is clear that the business demand merits it, due to the "doing more with less" or other scarcity mentality.

Up or out system that dictates that if you're not promoted within x years (depending on the location) then you're out, and which generally means you are thrown out of the industry in today's climate unless you can occupy some niche in an in-house position. This applies even if you are competent.

Neither of these require accounting for all things to the penny.

A lot of good stuff in this thread. Agree about massive amounts of unnecessary management. I've seen that at every company I've ever worked at.

Try being the guy in the boardroom that recommends slacking off on tracking expenses.

You'll leave the board room carrying a card "board" box w/ all your belongings.

And a pink slip.

'Precision' in logistics/accounting/etc has been pushed so far past diminishing returns in the modern business culture that's it's a borderline fetish. 'Just in time shipping' is used to justify all kinds of logistical abortions IME. Basically if your whole factory depends on x you really should always have x+1 on hand. Saving a little bit of capital and a little bit of warehouse space is in no danger of being worth running the risk of the line going down if a truck breaks down.

Is that what I said?
<checks the record>
Nope. That's a relief.

I'm not saying I agree with it. I'm saying that's why people do it. It's a tic-for-tac game employees play to score meaningless points in their boxed in, hopeless, corporate structure.

"Hi Peter, I noticed you charged the customer $46.67 when it should have been $47.17. You f*cked up while I just saved the company 50 cents. I must be a valuable employee, hence better than you"

Don't expect this petty game to stop anytime soon.