Page 6 - MS Year in Review 2020
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there on Black Monday to facilitate a strategic planning meeting. The mood was
somber but the meeting was productive.
One aspect of our planning process was to plan for a certain level of firm revenues.
This was, in turn, required to plan the level of infrastructure investment required by
the firm in the foreseeable future. The market crash was a “Black Swan event” (a
rare and an unpredictable event). However, it caused the senior leadership team to
resist planning for a defined level of revenues. This resistance (or the Ghost of
Black Monday) continued until 1991, when another unforeseeable event caused the
team to finally change its mind about the desirability of planning for a defined level
of revenues. Specifically, one of the firm’s flagship funds (called “Ultra”) had a
magnificent year and increased in value by 96 percent! This in turn lead to a
tsunami of investors to send money to the firm to invest in the Ultra
fund. However, this good event had a dark side. The SEC requires that funds
received by invested and acknowledged within a defined time period.
There was a literal flood of mail that virtually overwhelmed the firm and its capacity
to simply open the envelopes and acknowledge the receipt of the investments! The
firm was in serious jeopardy of being sanctioned by the SEC and forced to cease
operations! For a period of about three months it was “all hands-on deck”
and everyone was required to open mail and respond to investors,
including all senior executives who were working late at night as well as
on weekends!
This traumatic event convinced the executives that they must plan for possible
future levels of operations differently. They must forecast revenues and
activity volume and build in capacity (infrastructure) for unexpected increases in
volume. Opening mail was not per se “rocket science”; but too much mail required
a rocket science solution to create a process for handling it.
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