> As such, Oracle frequently oversold and underdelivered, but eventually grew big enough that it didn't matter
This is an extraordinarily common pattern in so many industries, when incentives are not aligned and it's OPM. And the worst thing is, if everybody else is doing it, you also have to do it.
For example, bank traders could (and in some places, it seems, still can) just lever up risk since if things go well, they outperformed their peers (riskier stocks go up - and down - faster) and made a great bonus; if a crash made things thornier, the bank would be in bad shape anyway and nobody would pick you out. I remember greatly admiring a famous "value" long/short equity fund in 2006 and a friend who was a more senior and experienced trader pointing out that they were "just levered beta"; three years later that fund was down a good 50%, proving him right.
I was reading, back in 2008 or 2009, the annual reports of a bank I was interviewing at. The letter from the CEO was noting, through the 2000s, the increase in risk taking in the mortgage securitisation space with increasing worry, and reassuring shareholders that no, at Bank X, this was not done because the ROI was not there to justify the risk.
Then a couple years before Lehman, there was a change in CEO due to "relative underperformance" of the stock, and the letter said something along the lines of "I know we're a bit late to the game but we are investing a large amount in that space and hired some great people from the competition".
Naturally that bank then needed a particularly large government bailout a couple years later, although the chairman of the board during the period famously retired with a very large pension (in fact his car was stoned for it by activists), showing that this strategy is still a great way to improve one's personal situation.
> I feel bad for a lot of the good employees who get caught up in the mess.
It seems to be standard in the job market to use the same strategy: overpromise and push the cost of an employee down as a result - and HR is actually rewarded for this.
I've been approached by many large tech companies for jobs and when talking with the managers there, the valuation they put on the options part of the package can get REALLY ridiculous (in some cases, 4-5x what the market thinks, let alone savvy investors). Older developers are wise enough to counter these offers, but I see a lot of younger folks enthusiastically buy into the myth and quit burnt out a couple years later.
I took an HR guy from a very famous and large Bay Area company that is mentioned here often for drinks and he admitted after about 7 whiskies that most of the people working there - including top, APAC-region managers - were paid about half what they could get in more normal companies, and that this was by design and a target. To be fair, I can't completely criticise them for doing it, since there was real value in working there for a while, as all the other companies in Singapore would then bid higher for your output detecting a "competence signal" in the American brand.
On Oracle - they had many competitors that they beat simply by outgrowing them. It's a fine line - the playbook hasn't worked yet for Zenefits. The game isn't over though. Oracle had many stumbles along the way, including some with the IRS. In the end they came out ok.
On banks - the saying I heard specific to trading at an investment bank was "If you're with the herd you're safe. If you make the right bet, and everyone else does, you get paid. If you make the wrong bet, and everyone else does, they can't fire everyone. If you make the right contrarian bet and everyone else is wrong, you don't get paid because your profits need to be spread around. If you make the wrong contrarian bet and everyone else is right, you are an outlier who doesn't get paid."
I think it's a perverse form of the Prisoner's Dilemma.
This is an extraordinarily common pattern in so many industries, when incentives are not aligned and it's OPM. And the worst thing is, if everybody else is doing it, you also have to do it.
For example, bank traders could (and in some places, it seems, still can) just lever up risk since if things go well, they outperformed their peers (riskier stocks go up - and down - faster) and made a great bonus; if a crash made things thornier, the bank would be in bad shape anyway and nobody would pick you out. I remember greatly admiring a famous "value" long/short equity fund in 2006 and a friend who was a more senior and experienced trader pointing out that they were "just levered beta"; three years later that fund was down a good 50%, proving him right.
I was reading, back in 2008 or 2009, the annual reports of a bank I was interviewing at. The letter from the CEO was noting, through the 2000s, the increase in risk taking in the mortgage securitisation space with increasing worry, and reassuring shareholders that no, at Bank X, this was not done because the ROI was not there to justify the risk.
Then a couple years before Lehman, there was a change in CEO due to "relative underperformance" of the stock, and the letter said something along the lines of "I know we're a bit late to the game but we are investing a large amount in that space and hired some great people from the competition".
Naturally that bank then needed a particularly large government bailout a couple years later, although the chairman of the board during the period famously retired with a very large pension (in fact his car was stoned for it by activists), showing that this strategy is still a great way to improve one's personal situation.
> I feel bad for a lot of the good employees who get caught up in the mess.
It seems to be standard in the job market to use the same strategy: overpromise and push the cost of an employee down as a result - and HR is actually rewarded for this.
I've been approached by many large tech companies for jobs and when talking with the managers there, the valuation they put on the options part of the package can get REALLY ridiculous (in some cases, 4-5x what the market thinks, let alone savvy investors). Older developers are wise enough to counter these offers, but I see a lot of younger folks enthusiastically buy into the myth and quit burnt out a couple years later.
I took an HR guy from a very famous and large Bay Area company that is mentioned here often for drinks and he admitted after about 7 whiskies that most of the people working there - including top, APAC-region managers - were paid about half what they could get in more normal companies, and that this was by design and a target. To be fair, I can't completely criticise them for doing it, since there was real value in working there for a while, as all the other companies in Singapore would then bid higher for your output detecting a "competence signal" in the American brand.