Well, Nexus ‘09 is over and it was another great event. It was such a great event people began  registering for Nexus ‘10 before we even started tearing down the booths and equipment.  The new year is here and the ImageSource team is already hard at work getting ready for Nexus 2010. The venue and date have been set. It is in beautiful downtown Bellevue, Washington at the Meydenbauer Center on November 4-5, 2010. The ImageSource team is already looking at prospective keynote speakers, presenters, making all the arrangements for fun and entertainment, and looking at the hottest topics that will truly ignite this year’s event!

We have a host of  management and technical tracks that we deliver every year. Year after year the management and technical tracks continue to attract more attention and excitement. These tracks have significant value for many individuals. There is wide variety of topic focus for Executives and Directors, IT Specialists, System Engineers, Project Managers, Records Managers, Business Analysts and Technology users. For those who hold a Project Management Institute (PMI)  certification like PMP, CAPM, PgMP, PMI-SP or PMI-RMP it is a great way to earn Professional Development Units (PDUs). It is our goal to provide you with relevant and timely information about Enterprise Content Management that you can take home and start using in your business and even personal life. 

That’s where you come in.

We are looking for your suggestions on the hottest topics out there that you have interest in? What is significant from a management and technical standpoint in the Enterprise Content Management space that you want to hear and talk about with your colleagues in the ECM industry? What is going on in the ECM industry that you feel will light up the sessions and discussions? What do you have a burning desire to know more about?

Even if you don’t plan to attend Nexus ‘10 (and you would be foolish not to),  we would still like to hear what you think the “hottest topics” are in Enterprise Content Management from a technical and management perspective. Let us hear your comments and suggestions so we can make Nexus ‘10 the hottest it has ever been.

Don’t forget to register too!

Nexus ‘10 Registration

Al Senzamici, PMP
Program Manager
ImageSource, Inc.

Okay, so this time around I’m going to attempt coherency – we’ll see how that works out.

First things first.  I started my new contract last week and things are going well so far.  I’m still trying to figure out the whos and whats and whens and whatnots – but I think that’s normal at this point.

Next, my first semester of graduate school officially started this past Thursday.  I am taking two classes this semester, the first is a 0 credit, 4.5 week, online course (yes, I said ZERO credits) that is mandatory for all graduate students in their first six credits.  It is called ”Intro to Graduate Research Study” and so far I’ve had to read about accurately citing materials, searching for research questions online and the penalties of plagiarism.  Pretty much as long as I participate, I pass, so all-in-all, not really a big deal.  My other course is a full out grad class called “The Fundamentals of Project Management” that is once a week on-site at good old UMD.  This week is my first class and I’m sort of stressed (and by sort of, I mean I absolutely am).  It seems like a lot of work and a lot more independent work than what I remember from my undergrad.  But enough about that, it’s really not exciting at all.

And finally, there is the CAPM, which is basically the baby version of the PMP (Project Management Professional), that I am preparing to take an exam for.  You have to have X amount of experience and then take a 150 question exam and pass with a 75% or better and then you receive your official CAPM certification.  So in a little less than two weeks I will take the prep course, and shortly after that I will take the exam, and wow…this (again) is boring for me to even talk about, so I’m just gonna stop there.

I feel kind of strange about everything I’m focusing my life on right now.  Like, I’m okay with the CAPM thing, because I really think that’s worthwhile, but this whole graduate school thing is just not really sitting well with me right now.  I feel very forced into doing it and not motivated at all.  I know it’s good for my career, I just…I guess that’s just it, I feel forced. Sigh.  It’s not really worth publicly dwelling on much beyond that.

In other news, this weekend was pretty uneventful.  It snowed, I studied, and I finally bought myself more groceries (I hadn’t really been in about two months).  Other than that?  I recently discovered the joy that is vanilla yogurt and that makes me happy, it’s like a healthy dessert.

Other things that make me happy?  M.  He makes me insanely happy.  Like, I’m happy when he’s around, thinking about him when he’s not, missing him when I know I won’t get to see him for a night, and just – happy to have him.  Things are just going really well with us right now and I feel super thankful for that.  He’s so great when it comes to all this stuff that stresses me out, too, he just knows me and he knows how to support me and how to calm me down and how to motivate me; and he lets me know he believes in me and that he’s always proud of me, which is something I absolutely love him for.  He just makes me smile – a lot.

The CAPM credential is expanding exponentially with the number of people passing the exam virtually doubling each year and the cumulative total of successful candidates at the end of 2009 exceeding 10,000.

Mosaic is one of the world’s most experienced CAPM trainers, our first CAPM course was conducted in 2003, the year PMI launched the credential, and several of our trainees from that course were in the first 100 credential holders world wide. We still find teaching CAPM courses one of the most rewarding experiences as we help trainees develop a sound understanding of the good project management principles contained in the PMBOK® Guide.

CAPM is not an easy exam to pass, to sample the type of questions likely to be in the exam try our 25 free CAPM questions at http://www.mosaicprojects.com.au/Free_CAPM_Questions_1.html
or sample our Visual PMBOK® Guide web tool at http://www.mosaicprojects.com.au/Training_vpmbok.html

If you are responsible for new project team members moving into the profession, I would certainly recommend CAPM as a step on the way to PMP in 4 or 5 years time.

Over the years there has been a lot of discussion on the value of credentials such as PMP; frequently triggered by the failure of a ‘qualified’ person to perform in the workplace.

There are essentially two ways to assess a person from a credentialing point of view. Testing what they know or assessing what they do. Competency based assessments (what they do) tend to assume knowledge based on performance. You cannot perform a complex task such as managing a project without knowledge. However, competency based assessments have two disadvantages:

• Competency is demonstrated in a specific a time and location. There is no guarantee the competent person will perform as well in a different setting with different people, cultures and relationships.
• The assessment of interpersonal competencies tends to be subjective and project management is very much focused on directing and leading people. Assessing behavioral competencies goes some way towards solving this dilemma but the assessment is still subjective.

Knowledge based assessments are empirical. The person had sufficient knowledge to pass a defined test at a defined point in time. However, the passing of a knowledge based assessment such as PMP or for that matter an MBA only shows the person has a predefined level of knowledge. The disadvantages of knowledge based assessments are:

• There is no indication the person can apply the knowledge effectively in the workplace.
• The knowledge tested in any exam is only a portion of the overall domain knowledge.

Given the problems with either assessment process, assessing the value of a qualification is complex and is differs depending on who is making the value judgment, an employer or an individual. The value of a qualification to an individual can be measured in at least three areas:

• The advantage it offers in the job market;
• The recognition governments and other licensing authorities give to credential holders and
• Its recognition by other entities offering higher qualifications through credits or advanced standing.

The value of a qualification to an employer is in part a function of the credentials reputation and in part, what this tells the employer about the credential holder. Whilst the PMP is a uniquely valuable industry based credential, no single assessment is ever going to provide a guarantee of a person’s suitability for employment in a particular organisation. Being a PMP provides one point of assessment; the PMP holder had the knowledge needed to pass a difficult, quality controlled exam. However, employers also need to look to other aspects of a person’s overall capabilities as well.

My feeling is the lack of undergraduate/baccalaureate degree courses in project management has given PMI’s PMP and other similar project management certifications a solid value in the job market. This is quite different to many other credentials issued by professional bodies. The UK based Chartered Institute of Building’s MCIOB credential requires a degree, several years experience, an examination and a professional interview; in most respects at least equal in its rigor to PMI’s PMP requirements. Both credentials should be assessed as being at a higher level than a degree but at least in the Asia Pacific region, the construction industry and governments focus on building managers holding a University construction degree, not MCIOB.

Similarly, higher degree courses in project management routinely offer some level of advanced standing for PMP holders. I am unaware of any advanced degree in construction or the built environment that offers similar advanced standing for MCIOB, although some other professional credentials do achieve a level of advanced standing in some higher degree courses.

This unusually valuable status of PMP as been built up over many years; however, the value also creates a number of challenges:

• Employers may have expectations of PMP holders not supported by the credential.
• But, credential holders need to live up to the reasonable expectations of their employers, and current credential holders also have the challenge of maintaining the worth of the credential for future generations of PMs.
• PMI needs to ensure the examination process remains both credible and effective.
• Training organizations such as ours need to ensure their PMP courses are relevant and interesting.

We have chosen to focus our training on the PMI range of credentials because they are a defined package, we know if we have done a good job as soon as a trainee passes their exam. The subjectivity of competence assessments lacks the clarity of pass/fail. However, look 5 to 10 years into the future and I expect the credentialing process will have change substantially to blend aspects of workplace assessment (competency) with the formal testing of knowledge. The Program Management Professional (PgMP) credential is a start along this route, my prediction is most other credentials will follow.

Yes, that’s right folks, I am officially a public transportation commuter - gooo me!  It’s not really an option I personally made, as much as it’s just that there is no parking for the building I work in, unless you have a permit (which I do not), so I pretty much have to metro.  It’s not so bad, though, because I walk 10 minutes to the metro, hop on the yellow line to L’Enfant for 15 minutes and then take a 10 minute shuttle ride to the USCG Headquarters building.  The building I work in is super nice too (at least the floor I work on), it’s evidently newly renovated (like it was finished two months ago), but the other floors are still being worked on.  And as part of this renovation they opened everything up so there is TONS of daylight and a view of the water and it’s just great. I don’t really have my own space, persay, it’s sort of shared space, but if I wanted to hang pictures or something I don’t think that’d be a problem.  Anyway, I’ve only been there three days now, but things are going well.  I’m already chin deep in assignments and feel like I’m behind because of it, but that is most likely my own doings.  I do feel a bit of pressure to pick up the program I’m working on quickly – which is a decently complicated program since I have to know the ins and outs of it.  I mean, I get the basics, but I need to know all the madness that goes on behind the basics, and that’s the tricky part.  It’s a different work environment, though, than anything I’ve known, which is kind of nice.  No one is really keeping tabs on me, and as long as I’m getting my stuff done and reachable during my 9 hour work day, I don’t think anyone cares.  I mean, don’t get me wrong, I need to be on-site with the customer 3-4 days a week at least, so it’s not like free reign to telecommute or anything, but it’s just nice that I don’t have to notify people a bajillion times and then get approval and then go in circles round and round when I don’t show up and people don’t understand why.  Ugh.  So am I even making sense right now?  I’m seriously pretty stressed lately but reeeally wanted to squeeze in an entry, so I’m kind of writing at lightspeed right now.

Other reasons why I’m so stressed?  Grad school starts tomorrow, which means I have a class that starts tomorrow and then starting next week I’ll be attending class every Monday night from 7-10pm.  Oh, and genius me, I signed up to take a prep course for the Certified Associate in Project Management (CAPM) exam, which I have to do prep work for – yes, I have to do prep work for the prep course.  So new job is stressing me out, grad school is stressing me out and CAPM is stressing me out.  And after I take the prep course, of course, I have to then actually go TAKE the exam.  Ahh!!  At least if I pass (which I say very generously), I’ll be “Ms. Erin P. Boteler, CAPM” – as if anyone will even know what that means.  Ugh.  Why did I do this to myself????

So tonight’s plan is to organize organize organize.  I need to make sure I have everything I need, and that I set out a schedule and read through my syllabi (syllabuses?), and take control of this mess!  I just need to survive this first semester and go from there.  I mean, if it’s too much, then it’s too much and I’ll re-evaluate from there, but I guess I shouldn’t allow myself to be defeated before I’ve even begun – right?  I just seriously don’t know how I’m going to have any sort of life outside of work, studying for the CAPM and school for at least the next month. Okay, this blog is even stressing me out now because I know it’s already 630pm and I haven’t started organizing!  On the upside, at least I can check off the “update blog” item on my list?

By HopeForTheDismalScience
(William P Bell)

The Efficient Market Hypothesis (EMH) and Capital Asset Pricing Model (CAPM) are a framework and standard financial tool, respectively. Together, they provide a worldview for financiers and determine their decision-making in the financial markets.

Fama (1965; 1970) introduces the EMH in three market efficiency levels: a strong level where all relevant information regarding a stock is fully reflected in its price; a semi-strong level where all publicly available information is reflected in its price; and a weak level where current prices reflex all past history of the prices.

Fama and French (2004, p. 25) note that CAPM of William Sharpe (1964) and John Lintner (1965) marks the birth of asset pricing theory (resulting in a Nobel Prize for Sharpe in 1990). Four decades later, the CAPM is still widely used in applications, such as estimating the cost of capital for firms and evaluating the performance of managed portfolios. It is the centerpiece of MBA investment courses. Indeed, it is often the only asset pricing model taught in these courses.

However, Fama and French (2004) evaluate the performance of CAPM and conclude that empirical evidence invalidates the use of CAPM in applications, after finding that passive funds invested in low beta, small or value stocks tend to produce positive abnormal returns relative to CAPM predictions. This is relevant to EMH for two reasons; the criticisms come from the founder of EMH, Fama, and CAPM builds on the assumptions of EMH. Put simply, those using the CAPM invest more heavily in higher risk investments than is optimal, which contributes to the Global Financial Crisis (GFC). If these models continue to be taught in financial courses, they will help set the stage for the next GFC. Furthermore, this evidence is another nail in the coffin of neoclassical economics; the failings of neoclassical economics is discussed further in my posts ‘The G8 protests and the logically inconsistent foundations of neoclassical economics’ and ‘G8 or G20 Protests and Computable General Equilibrium (CGE) modelling and its Dual Instability Problem‘.

The EMH is discussed further in my post ‘Hormonal Male Traders producing a Momentum Effect contrary to the Efficient Market Hypothesis and Rational Choice’

References

Fama, EF 1965, ‘The Behavior of Stock-Market Prices’, Journal of Business, vol. 38, no. 1, pp. 34-105.

— 1970, ‘Efficient Capital Markets: A Review of Theory and Empirical Work’, Journal of Finance, vol. 25, no. 2, pp. 383-417.

— 1998, ‘Market efficiency, long-term returns, and behavioral finance’, Journal of Financial Economics, vol. 49, no. 3, pp. 283-306.

Fama, EF & French, KR 2004, ‘The Capital Asset Pricing Model: Theory and Evidence’, Journal of Economic Perspectives, vol. 18, no. 3, pp. 25-46.

Lintner, John. 1965. “The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets.” Review of Economics and Statistics. vol. 47, no. 1, pp. 13-37.

Sharpe, William F. 1964. “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk.” Journal of Finance. vol. 19, no. 3, pp. 425- 42.

Peter Thiel has said that Rene Girard is the greatest philosopher since Kant–mainly, I take it, because Girard appears to have been the first to emphasize the self-impoverishing consequences of imitation. The quote above is Emerson’s, but the theory belongs to the Frenchman.

With that in mind, I turn to Eric Falkenstein, who writes:

I argue that people are primarily driven by envy as opposed to greed (see here), so they are mindful of their relative, as opposed to absolute, position, and this leads to doing what others are doing as a mechanism of minimizing risk.

For Falkenstein, it seems envy motivates imitation. His post is on the topic of envy in general, but for his theory to have the explanatory power it claims, it also has to include some account of why envious humans wish to imitate their rivals. That’s a surprising connection, and since that is precisely what Girard’s theory of mimetic desire explains (his book on Dostoevsky was edifying), I’m beginning to see more merit to Thiels’s praise than I at first imagined. This may be the first time in history a French literary theorist has something interesting to say about finance.  And yes, I’m as shocked as you are.

In his book on finance, Falkenstein proposes a “relative-status” theory of envy to explain misguided risk-taking and in his post, he highlights some other anomalous facts explained by this. To chose but a few: people tend to over-invest in their home countries, even though a truly diversified portfolio would have a more international flavor; people gain little happiness in comparing how well-off they are to those living 100 years ago (or to those living in undeveloped nations);  people gain satisfaction in seeing a high status member of the tribe brought down to size, hence the strange support for wealth-destroying redistributive policy, and so on.

But what does this have to do with letting a thousand nations bloom? All political philosophies are rooted in assumptions about human nature. Some gel with human instincts. Others do not. Adam Smith was the first to describe how the pursuit of self-interest can lead to socially desirable outcomes. It is unfortunate, given its prevalence, that envy doesn’t have comparable spill-over effects. Falkenstein writes:

John Adams made sure the USA had many republican features because he worried that “There never was a democracy yet that did not commit suicide”, an opinion first articulated by Thucydides in the fifth century BC. I think this is because mob rule unleashes the envy of the masses, which brings down the best, and in the process the talented tenth, the elites, that drive anything worth cumulating upon in the realm of ideas (and thus, art, science, and technology).

There is a greater place for understanding the role imitation and envy play in political philosophy. If we’re going to re-evaluate the rational actor model, Rene Girard is a good place to start–not the rational pursuit of self-interest, but the irrational pursuit of unenlightened self-enslavement. Demagogues and academic philosophers thrive on creating the illusion that your neighbor’s success comes at the cost of your own and that the prosperity of a country requires tearing that man down. Envy is ignorance, imitation suicide.

saga.vn

Cost of Equity

• Cost of equity (K_e) is the rate of return required to induce investors to purchase a firm’s equity. It can also be viewed as an opportunity cost, because it represents the rate of return investors could earn by investing in equities of comparable risk.
• Cost of equity (K_e) is estimated using the Capital Asset Price Model (CAPM) that says investors require higher rates of return for accepting higher levels of risk. Specifically, CAPM states that the expected return on an asset is equal to a risk-free rate of return plus a risk premium.
• A risk-free rate of return is one for which the expected return is certain (no default or reinvestment risks). U.S. Treasury securities is widely used for risk-free rate of return. However, whether to use 3-months treasury bill or 10 year treasury bond depends on how long the invest plans to hold the asset.
• The market risk or equity premium refers to the additional rate of return in excess of the risk-free rate that investors require to purchase a firm’s equity. Though it is perceived risk of the stock (i.e. forward-looking), keeping difficulties in future projections (your projection depends on your assumptions and there is no agreement over assumptions) in mind, analysts often look to historical data. Limitation of historical data is time-period chosen and whether returns are calculated as arithmetic or geometric means (arithmetic mean preferred because of its additive nature).
• CAPM says:

K_e = R_f + β(R_m – R_f)

where,

R_f = risk free rate of return

β = Beta

Rm = the expected rate of return on equities

R_m – R_f = equity risk premium relative to bond

• Limitation of CAPM: beta tends to vary over time and are quite sensitive to the time period and methodology employed in their estimation. Market risk premium is unstable, lower during periods of prosperity and higher during periods of economic slowdowns. Also CAPM measures a stock’s risk only relative to the overall market and ignores returns on assets other than stocks, some analysts use multi-factor models.
• Multi-factor model (accounting for firm size): Smaller firms are subjected to higher default risk and generally being less liquid than large capitalization firms. CAPM with adjustment to firm size is as follow:

K_e = R_f + β(R_m – R_f) + firm_size_premium

Selection of firm_size_premium depends on judgement of the analyst using some guidance from analysis of historical data.

Cost of debt

Pretax cost of debt represents the cost to the firm of borrowed funds reflecting current level of interest rates and the level of default risk as perceived by investors. Default risk can be measured by the firm’s credit rating by for example, Standard and Poor’s. For unrated firms, pretax cost of debt of similar (based on d/e ratio, interest coverage ratio and operating margin) rated firms could be used. Alternatively, firm’s actual interest expense as a percent of total debt outstanding could also be used. Interest paid on debt is tax deductible by the firm.

Cost of preferred stock

Considering preferred dividends (assumed constant) as paid in perpetuity, the cost of preferred stock can be calculated as the ratio of dividend per share of preferred stock and market value of the preferred stock. It is supposed to be riskier than debt but less risky than equity. Hence its value would be more than pretax cost of debt and less than cost of equity.

Cost of Capital

The weighted average cost of capital (WACC) the broadest measure of firm’s cost of funds and represents the return that a firm must earn to induce investors to buy its common stock, preferred stock and bond. WACC is calculated using weighted average of the firm’s cost of equity(K_e), cost of preferred stock (K_pr) and pretax cost of debt (i):

Where,

E = the market value of the common equity

D = the market value of debt

PR = the market value of preferred stock

t = the firm’s marginal tax rate

• Because of tax-shield, the effective cost of borrowing is reduced by (1-t).
• The weights in WACC equation represents target capital structure that the firm hopes to achieve and sustain in future. The actual capital structure may be different.
• Market values rather than book values are used as WACC measures the cost of issuing debt, preferred stock and equity, which are measured at market value and not book value.
• Non-interest bearing liabilities such as accounts payable are excluded from estimation of WACC to simplify calculation. Such liabilities are assumed to have been included in the price paid for products and services whose purchase generated the accounts payable.
• Firms such as Standard and Poor’s and Bloomberg provide estimates of industry betas, cost f equity and WACC that could be used by analyst to benchmark his own estimates.

Mosaic experienced a sudden surge in training enquiries during the last few weeks of 2009 (the end of the noughties). We assumed this was associated with the end of the GFC induced slow down in Australia but there would appear to be a deeper problem.

The Australian Institute of Management (AIM) has just released a major survey that suggests that 40 per cent of Australian organisations are already seeing a negative impact on profits and performance goals caused by a skills shortage; 76% of more than 2,000 executives surveyed said their organisations have a workforce ‘skills gap’ where the term ‘skills gap’ was defined as the gap between an organisation’s skills needs and its current employee capabilities.

Interestingly, 65% of the respondents who did not think there is a skills gap in their organisation, believe their organisations have avoided a skills gap by a strong commitment to training and development.

Survey participants said the single biggest skills deficiency in Australian organisations was ‘leadership’. The major skills deficiencies identified by respondents were:

• Leadership 45%
• Professional or industry specific skills 43%
• Process and project management skills 36%
• Managerial skills 31%
• Communication/interpersonal skills 31%

Given our workshops and PMI Credential courses cover most of these shortages, it looks as tough we are in for a busy start to 2010; however, before then we are planning to slow down through the holiday period to recover and prepare for a busy 2010 starting with our first PMP and CAPM course on the 11th January.

Wishing you all a happy, safe and peaceful Christmas and New Year.

先週、財務会計の講義を受けて気がついたことがあります。それは…
「自己資本コスト」と「個別証券の期待収益率」が同じものであるということが、全く理解出来てなかったということ。

ショック！

よくよく考えてみればそうですよね。投資家目線でみるか経営者目線でみるかの違いなわけで。数字としては同じ。

講義は聴いていた「はず」なんですが、全くつながっていなかったということ。問題解いていても、全然気がついていませんでした。だから、長い問題文なんかは使う数字が分かっていないわけで…一次試験も落として当然というか、なんか勉強の仕方が違っていたかなと今さらながら反省しています。

解ってしまえば、加重平均というのは、数学でも物理でもおなじみの概念なので、さほど難しくありません。自己資本コストが何を意味するのか、個別証券の収益率が何をさすのか、そういった「超」基本的な事項の確認もしなくてはいけませんね。

【今日の勉強】
・ファイナンス関係の過去問の整理
・H20-16問の確認（WACC／CAPMの計算）

quarta edição do pmbok

Já está disponível em português a quarta edição do PMBOK, um dos guias de maior referencia no Brasil e no mundo para o gerenciamento de projetos.

O guia pode ser comprado pelo link:

www.pmi.org/Marketplace/Pages/ProductDetail.aspx?GMProduct=00101168901

Agora, não existe mais desculpa para deixar de estudar para  a prova de de certificação CAPM e PMP,  aliás existe o diferencial de que os primeiros certificados serão certificados nas práticas mais atualizadas dentre as publicadas.

Finance and parsimony…almost sounds like a bizarro Rufus Wainwright song-title. More seriously though, I’ve been reading a variety of perspectives on social science methodology lately; the notion of parsimony, and the role that it plays in “proper” social science research, is often thrown about and debated. Consider the following from King, Keohane and Verba’s seminal Designing Social Inquiry:

Parsimony is therefore a judgment, or even assumption, about the nature of the world: it is assumed to be simple. The principle of choosing theories that imply a simple world is a rule that clearly applies in situations where there is a high degree of certainty that the world is indeed simple. Scholars in physics seem to find parsimony appropriate, but those in biology often think of it as absurd. In the social sciences, some forcefully defend parsimony in their subfields, but we believe it is only occasionally appropriate. Given the precise definition of parsimony as an assumption about the world, we should never insist on parsimony as a general principle of designing theories, but it is useful in those situations where we have some knowledge of the simplicity of the world we are studying (KKV, p. 20, emphases are mine).

KKV categorically deny that parsimony is a necessary feature of good social science, which most people agree with (while I don’t agree with a lot of DSI, this seems like a fairly uncontroversial point). I think the more interesting point in there, though, is that parsimony follows from a certain world-view…la vie en rose, if you will. Recognizing this illuminates much of the methodological debate over the role of parsimony- people holding KKV’s view that parsimony is not essential, seem to often think that proponents of parsimony are turning a desirable condition into a necessary one i.e. that parsimony arises out of a certain view on methodology. However, it would seem more accurate to say that those in favor of parsimony, see this necessity as arising out of a different world-view i.e. an object-related imperative. There is a subtle distinction between object-related and method-related imperatives underpinning the debate.

Now, put those thoughts away for a bit and make a jump over to this post (courtesy Mike Konczal). I won’t bother reproducing the argument here- its a short post anyway- but the relevant take-away point is that revolutions in financial modeling and technology led to a certain standardization in financial markets. The author notes:

It is not just that Black-Scholes-Merton formula allows us to price options. It allowed sophisticated analyses of returns, captured by risk and volatility. Risk is the magic commensuration mechanism. Commensuration here means a metric (often, but not necessarily quantitative) that allows us to compare two otherwise qualitatively distinct objects. Understanding returns as a function of risk and volatility (assumptions and measures about transaction costs, liquidity, and the like can be incorporated as well) means that real estate, bonds, stocks, derivatives, collateralized debt obligations, fine art, even your Uncle Earl’s gold coin collection can all be translated into a common metric: how much risk, how much volatility, equals how much return?

And further on:

As a result of this fact – this fact of the contemporary world of risk management and globalized finance – a number of assumptions that we had previously held to be true no longer are. For example, arguably commercial banks, insurance companies, and investment banks are indeed all doing the same thing: they are all trading in risk. The ways they do this continue to differ, but the underlying ways that they can calculate their worlds have moved closer.

This move towards homogeneity has a number of regulatory and systemic implications (covered by the author and Konczal), but my concern here is with the sort of market-view that it engendered. As finance has evolved, it has become stickier in the sense that separation of its various components, in a relevant manner, has become harder. I use “relevant” in the sense that fund managers and investors are largely interested in the means by which ordinal rankings become easier to carry out. Diverse measures across the industry have come to be expressed in similar terms (Konczal refers to this reified entity known as “the underlying”). I keep pointing to Felix Salmon’s great piece in Wired, where he notes inter alia, of David Li’s Gaussian copula:

It was a brilliant simplification of an intractable problem. And Li didn’t just radically dumb down the difficulty of working out correlations; he decided not to even bother trying to map and calculate all the nearly infinite relationships between the various loans that made up a pool. What happens when the number of pool members increases or when you mix negative correlations with positive ones? Never mind all that, he said. The only thing that matters is the final correlation number—one clean, simple, all-sufficient figure that sums up everything.

And talking about the boom in CDS and CDO markets:

At the heart of it all was Li’s formula. When you talk to market participants, they use words like beautiful, simple, and, most commonly, tractable. It could be applied anywhere, for anything, and was quickly adopted not only by banks packaging new bonds but also by traders and hedge funds dreaming up complex trades between those bonds.

Now, you could make the argument that the increasing homogeneity of market jargon and easy adoption of formulae like Li’s result in a parsimonious view of financial markets, and the world in general. I don’t want to put the cart before the horse here, but at some level, it seems that the continual move towards simplicity must foster a world-view of parsimony. CAPM, Black-Scholes, Li’s copula….they all found remarkably simple ways of describing a wide range of things in the world and I find it hard to believe that expediency was the only reason that such formulae were so readily adopted. We all want to believe that the world can be simplified and are quick to jump onto a bandwagon that does so. Felix Salmon provides the details for why Li’s brand of parsimony failed so spectacularly, but I think the overall lesson is generalizable.

Indeed, I think the problem with such simplifying views of the world speaks to the key methodological issue with positive science- it assumes an underlying (pardon the pun) that is empirically verifiable. KKV themselves have come in for much criticism from interpretivists- amongst others- for providing a parochial view of the world and the manner in which we measure and interpret aspects of it (see this Lisa Wedeen paper for a good example). Now, I don’t mean to carry over a debate in political science methodology over to finance and I’m certainly not advocating interpretivism as the new financial paradigm (would such a suggestion even make sense?) However, I think the broader methodological point viz. that we should be aware of the dangers inherent to fostering a parochial view on the way the world works, is one that has some relevance; I talked about this in the context of the broader macroeconomic debate as well. While the erroneous adoption of a flawed formula is a large part of the problem, lets not forget the culture that engendered it.

I have been asked to bid on a project to write a book that documents the alignment of Microsoft Project 2007 with the PMBOK Guide. I’m not so sure it really matters if a project management tool is built to achieve some level of alignment with the PMBOK (or any framework for that matter). My experience with my enterprise / G1000 customer accounts is that the tool in use has had to prove some level of customization / flexibility so that it could be made to enforce or support the customer’s unique project management life cycle.

Do you think it’s important that a generally available project management tool be built with a particular framework in mind? If so, why?

I am interested in roles in telecommunications consultancy or project management. Contract or permanent roles would be considered.

Do you consider yourself a global project manager? If so, let’s see how you respond to this five-question survey:

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While PMP (Project Management Professional) certification, sponsored by the Project Management Institute (PMI), is the most recognized and respected certification credential in the field of project management, CAPM credential recognizes a demonstrated understanding of the fundamental knowledge, processes and terminology as defined in A Guide to the Project Management Body of Knowledge (PMBOK® Guide) that are needed for effective project management performance. To achieve CAPM credential, each candidate must satisfy a set of educational and experiential requirements established by PMI, agree to adhere to a code of professional conduct, and must demonstrate an acceptable and valid level of understanding and knowledge of project management. For more information, check the certification page on the PMI Web site. The next section describes easy steps to prepare for CAPM based on my personal experiences. (I was certified last month after preparing for about a month at my own relaxed pace.

Before I start on the 3 easy steps, let me emphasise that the most important help in your preparation will be your prior hands-on project management experience. I found it very easy to relate the course material to the practical cases I have witnessed in my 7 years of career in the IT industry. That knowledge gained on the job floor is the most valuable tool. So, if you think you lack that experience, at the same time feel confident of tackling the exam purely on the basis of reading literature, think again. Take a practice test (there are few available online for free), if you score below 50%, you will need a lot of time for preparation.

So, here are the 3 easy steps:

1) Read the PMBOK guide

2) Take a prep course

3) Practise tests before the actual exam

Now the details.

A few successful candidates in their post-exam retrospective analyses recommend reading the PMBOK guide 4-5 times. How do they manage to do that is beyond my understanding. I found the guide to be informative, but poorly organised with no element of humour or any intention of the writer(s) toward making the content interesting. With previous on-the-job experiences, you may know most of the stuff. After going through the first couple of chapters, I had to toil and drag with extra doses of caffiene to keep myself awake and pretend to read. Still, there is no escape. Every serious candidate must read it at least once to know the exact syllabus.

Fortunately for me, my online course prep material came to my rescue. I had taken Rita Mulcahy’s PMP course material for preparation, intented for preparing candidates for PMP over 6 months period. The course is consice, lucidly written (and shown as videos) and to-the-point, no-nonsense prep material. Its an excellent material to fill gaps in your knowledge. More importantly, it keeps you interested in the subject. I went through the whole material once and partially revised at least twice. Again, I don’t like re-reading anything and so, I must give credit to Rita and team for coming up with this interesting course.

Practice tests – I took 2 of those from Rita’s course and a couple more from online sources. I wish, I had some more. I would advice anybody to take tests till he/she is comfortable taking long tests, its not easy concentrating for long hours.

Tips for exam day: You will get all your accessories during the exam – pencils, earplugs, sheets of paper to sketch anything you want. There is enough time, move at a constant pace. Go for breaks after every hour or take more if you like. I had no trouble concentrating and with sufficient time, was never stressed. Do not get bogged down on a question for which you may not be sure of the answer, just mark it and move ahead. You can get back at the marked questions later.

A disappointment for me was the absence of situational questions. I find those very easy and I hope, I’ll find more of those in the PMP exam. Taking cues from your actual PM experiences, its easy to tackle such questions. However, a careful reading of Rita’s course can also help you understand the PM perspective and a PM’s methods of responding to management problems.

If you have any specific questions, drop me a line. Good luck for your exam!