To Bert, outer space was a source of endless fascination. It was the impossible summit that kept him climbing, the unknowable promise that kept him alive. So it was appropriate, then, that Bert Cooper died the instant the moon ceased being a metaphor and was forever transformed into something tangible. There’s a difference between gazing up at something in wonder and stepping on it with authority. A little bit of mystery winked out of the universe on that fateful night in 1969.
Sterling Cooper forever.
Much of what is wrong stems from something IBM is doing “right”: steadily increasing its adjusted earnings per share, a measurement Wall Street adores. In 2010, Rometty’s predecessor, Sam Palmisano, pledged that per-share earnings would reach $20 in five years, a plan called Roadmap 2015. In interviews, and even in public Internet posts, employees refer to the plan bitterly as Roadkill 2015. To make earnings rise while revenue is falling, Rometty has cut costs, sold business lines, fired workers, figured out ways to lower IBM’s tax rate, bought back shares, and taken on debt. Of the 25 analysts tracked by Bloomberg, nine predict that IBM will indeed hit the $20 target. The question is what type of company Rometty will have left when she gets there.
As an expert on poker, I submitted two recent statistical studies. (I was paid to research the evidence and confer with the defense before the hearing.) The first paper was “Economics of Poker: The Effect of Systemic Chance” (2012) by Robert Hannum, a professor of risk analysis and gaming at the University of Denver. His study of more than a billion hands of online Texas Hold’em found that 85.2 percent of the hands were decided without a show of cards. In other words, players’ betting decisions were of overwhelming importance in determining the outcome. Of the remaining 14.8 percent, almost half were won by a player who didn’t hold the best hand but instead had induced the player with the best hand to fold before the showdown.
Hannum concluded: “Clearly the driving force behind the economic outcome of Texas Hold’em is skill rather than chance.”
The second study was “The Role of Skill Versus Luck in Poker: Evidence From the World Series of Poker” (2011) by Thomas Miles and Steven Levitt of the University of Chicago. During the 2010 World Series of Poker, 720 players identified beforehand as high-skilled earned an average return on investment of 30.5 percent, an average profit of more than $1,200 per player per event. The average return of all other players was minus 15.6 percent, a loss of more than $400 per event. Miles and Levitt noted that the divergent returns on investment were “highly statistically significant and far larger in magnitude than those observed in financial markets, where fees charged by money managers viewed as being the most talented can run as high as three percent of assets under management and thirty percent of annual returns.”
Every disruptive innovation shares (at least) two characteristics. First, the newly introduced technology is more often than not inferior in some key dimensions, while superior in some dimensions that in the current context seem to matter more. Second, despite much consternation, the technology being disrupted is almost certainly going to remain a vital part of the landscape in some form or another for quite some time—either simply because of the long tail of legacy or because it serves a function that is not replicated at all.