The private sector has a much easier job than the public sector. Most private-sector enterprises have a limited time horizon, with a few notable exceptions such as petroleum or life insurance. Few companies last for decades, or are built that way. Governments have much longer average lifespans.
that's a fair point, but the accounting standards are set up to allow for very long-lived companies (of which there are quite a lot), and most companies IMO set out on the assumption that they'll last for longer than the depreciation life of their assets.
I don't where I read about concrete roofs in British swimming pools roof collapsing. It must have been in the last century that is best forgotten. I know it was in the beginnings of the internet.
Another fun story about paying forward for maintenance was about one of the ancient colleges where the roof beams of a critical structure were found to be Beatle ridden and near failure. The powers that be were wondering where they would get replacement wood for the beams. So they called in the college forester who told them oak trees had been planted 300 years ago for this replacement project.
The fault *is* in us, for expecting any single number to do the job of a distribution evolving over time (think you hit this one squarely in your first Prison stretch)
I had a grim experience in the late noughties implementing a new credit risk system based on Predicted Future Exposures (PFE). Of course "simple" PFE is still just a number, but behind it is the whole distribution you can do sensible, informative things with to understand aggregate positions, sensitivities etc - it comes with a "modelled mentality" that invites you to interrogate the numbers in different ways.
There were lots of problems with our implementation, and lots you can argue with in the PFE approach generally. But the reason it was badly received was much more basic and pathetic: senior management didn't get the mentality at all (though they had commissioned the new system and been painfully lectured on the need for and benefis of the approach). The sense that the PFEs were just a conventional point on a broader distribution was lost on them; they hated the fact their teams couldn't just add numbers on a spreadsheet any more. They just wanted the comforting linearity of scalar nominal values.
"Too many accountants, not enough actuaries..." (forthcoming, Iyi press). I do wonder if this isn't a big part of the growth problem in Britain. Do German or US managers & bureaucrats just understand risk better?
I worked on PFI deals 20 years ago (not schools) and one of the touted benefits was “whole life costing” where the deal obliged the FM provider to maintain the building - probably to a better standard than would have been the case if procured directly bu the public sector. Instead what we have is poorly constructed / maintained buildings, resulting in a PFI fee rebate which is spent on educational basics and not maintaining the building. (Search the article for “failure payments”)
in the swan-dive phase of my Bank of England career, one of the many unpleasant and no-hope tasks I was assigned was to keep a "watching brief" on PFI in case it ever caused trouble for the financial markets. What I distinctly remember is that some of the early deals included not only a risk premium, but an additional premium reflecting the risk that a future government would regard the risk premiums as excessive and try to claw them back.
The private sector has a much easier job than the public sector. Most private-sector enterprises have a limited time horizon, with a few notable exceptions such as petroleum or life insurance. Few companies last for decades, or are built that way. Governments have much longer average lifespans.
that's a fair point, but the accounting standards are set up to allow for very long-lived companies (of which there are quite a lot), and most companies IMO set out on the assumption that they'll last for longer than the depreciation life of their assets.
I don't where I read about concrete roofs in British swimming pools roof collapsing. It must have been in the last century that is best forgotten. I know it was in the beginnings of the internet.
Another fun story about paying forward for maintenance was about one of the ancient colleges where the roof beams of a critical structure were found to be Beatle ridden and near failure. The powers that be were wondering where they would get replacement wood for the beams. So they called in the college forester who told them oak trees had been planted 300 years ago for this replacement project.
The fault *is* in us, for expecting any single number to do the job of a distribution evolving over time (think you hit this one squarely in your first Prison stretch)
I had a grim experience in the late noughties implementing a new credit risk system based on Predicted Future Exposures (PFE). Of course "simple" PFE is still just a number, but behind it is the whole distribution you can do sensible, informative things with to understand aggregate positions, sensitivities etc - it comes with a "modelled mentality" that invites you to interrogate the numbers in different ways.
There were lots of problems with our implementation, and lots you can argue with in the PFE approach generally. But the reason it was badly received was much more basic and pathetic: senior management didn't get the mentality at all (though they had commissioned the new system and been painfully lectured on the need for and benefis of the approach). The sense that the PFEs were just a conventional point on a broader distribution was lost on them; they hated the fact their teams couldn't just add numbers on a spreadsheet any more. They just wanted the comforting linearity of scalar nominal values.
"Too many accountants, not enough actuaries..." (forthcoming, Iyi press). I do wonder if this isn't a big part of the growth problem in Britain. Do German or US managers & bureaucrats just understand risk better?
On a related note, this article in the FT illustrates the paucity of public sector budgeting:
https://www.ft.com/content/96a37654-f8ea-46e3-a5ab-ca1d69dc5ea0
I worked on PFI deals 20 years ago (not schools) and one of the touted benefits was “whole life costing” where the deal obliged the FM provider to maintain the building - probably to a better standard than would have been the case if procured directly bu the public sector. Instead what we have is poorly constructed / maintained buildings, resulting in a PFI fee rebate which is spent on educational basics and not maintaining the building. (Search the article for “failure payments”)
So depressing …
in the swan-dive phase of my Bank of England career, one of the many unpleasant and no-hope tasks I was assigned was to keep a "watching brief" on PFI in case it ever caused trouble for the financial markets. What I distinctly remember is that some of the early deals included not only a risk premium, but an additional premium reflecting the risk that a future government would regard the risk premiums as excessive and try to claw them back.