Wednesday, November 16, 2011

Understanding the why

While driving to Boston to moderate a panel on fixed income investing, my wife and I were listening to David Baldacci's latest book, Zero Day. Early in the book he explains why folks in the UK drive on the left-hand side of the road. It apparently dates  back to the "jousting days," when knights typically approached their opponent on the left hand side, since most were right handed, and this would be a better way to attack.

The reason Americans drive on the right-hand side is, as I understand it, is attributable to an American Indian custom of approaching oncoming riders on the right, as a way to show that they came in peace. Funny how both are apparently due to horse riding, but for completely opposite reasons.

Understanding "the why" behind why we do things can be quite helpful.

I was engaged in a conversation with another verifier last week at our European Performance Measurement Forum meeting in Budapest, Hungary. The question we addressed: "why do firms in Europe not have GIPS(R) (Global Investment Performance Standards) performance examinations done, while they are quite common in the States? The "why" here is pretty clear: it dates back to the days of the AIMR-PPS(R), when large accounting firms wouldn't do a "Level I" ("verification" in today's terms) verification, but would do a "Level II" (equivalent to today's examinations). And so, for many years lots of U.S. firms were only having Level II (examinations) done. When GIPS was introduced, these same verifiers dropped the prior restriction. As a result, the firms that perhaps would have avoided Level IIs had their verifiers offered Level Is continued as they had been.

Understanding "the why" might cause us to reconsider some of the things we do, though I wouldn't hold my breadth on anyone shifting the side of the road they drive on any time soon.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.