From a former employer - which was a real estate developer. The CFO didn't know what an IRR is, and doesn't seem to understand compounding. He was a bean counter who rose to CFO just by virtue of never leaving over 30 years. Because the big boss isn't a finance guy either, he just defers to the CFO. But it was apparent when we discussed projects with the CFO that he had no clue what we were talking about.
Us: "Project equity in is $100mn, so with a 15% IRR, in 3 years we'd be looking at $152mn."
CFO: "No you'd be looking at $115mn. And if it's so low a return, then we should just buy some shares in public stock."
Us: "No, it's 15% IRR - you know, an annual return of 15%...."
CFO: "That's what I said. A 15% return. No need. We just buy some shares."
How are we supposed to share stories when they'll be immediately dwarfed by a CFO who doesn't understand compounding? lmao
Great story. Would love to see that guy in an investor presentation.
I concur. I can't think of a single person more incompetent than a CFO who doesn't know basic--BASIC--finance stuff. That's incomprehensible to me.
I'm just blown away that the CFO didn't even assume return of $145mm. Not only did he not understand compounding, also didn't understand concept of annualized returns...
That's a good point. Multiple dynamics of ignorance going on there.
I run into grossly incompetent people that are just like what you described above...more luck than skill.
Anyways, the best I've run into was a guy with a company doing ~$30M+ a year in revenue but he only received books once a year and they weren't really books either. When we started the DD process...I asked for books and he sent me their fucking tax return via paper.
The company ended up declining from $30M/yr to $15M/yr within a 2 year period but it was because he never bothered building a mobile website...and the company was an eCommerce site! For reference, you can buy a mobile ready template in Shopify (which easily handles sites that large) for like...$50 - $150 and swapping over would have been super easy as nothing was specialized.
The ONLY reason he managed to scale so easily is because he was one of the first guys selling the specific product he sold online, and he acquired customers back when digital marketing was easy...and customers were like $3 instead of $30.
Why did he send you tax returns intead of the books? Did he only read one book a year, thats slow. Maybe he was afraid to share his sex novels. ...JK, but the first thought I had was why are you asking for books he read.
Not sure if you're joking but books = financial statements lol
a non-financial guy at a small business who’d never had to look at financials sent you his tax returns - which, btw, has the summary info for IS and BS? not that bad.
Second year analyst did not know the difference between discretionary and non-discretionary.
I bet he found out during bonus season.
Wealth Management 11:00 AM goes out to lunch with teams in office and fixed income PM. PM goes in depth on how corporate high yield is getting exceedingly risky late cycle and if you want to take that would be better to just be in equities.. or go for higher quality bonds 12:30 PM back in office.. boss builds model portfolio for client with 20% of assets in corp high yield credit fund because "the alpha's looked good" completely oblivious to everything discussed at lunch
Could there be more factors to the decision here? Like office politics?
No, sheer incompetence
First IB stint out of school where worked with a VP in his 40s who was incompetent at literally EVERYTHING he did. I still to this day have no idea how he got his job or got into a target ivy for MBA. He had no idea how to run an M&A process and EVERYTIME my MD (who was hands off but very demanding) asked for the status of a deliverable, my VP would just look at me and expect me to answer (keep in mind I had zero experience starting the job and the VP was supposed to be running the deal).
One instance I remember in particular was when we were on a call with a client going over the CIM... I remember us going through the deck slide by slide and at the end of the call he said to the client, "Well, we'll leave the rest of deck for you to go over stuff like spelling and grammar, you know, the tedious stuff"... my jaw dropped.
Plus for you though, your VP's lack of knowledge allowed you to take more of a lead on the deals. Downside being it sounds like you didn't have anyone to learn from there.
Kind of a virtuous cycle right? He got into a good MBA, possibility undeservedly, and then a good IBD as a result, then lateraled to another Bank, and if he stays long enough he will rise in the ranks. And one day he may become POTUS.
The amount of people that "fail upward" in this industry is mind boggling. Curious if it is the same across other competitive fields.
you mind sharing what mba? genuinely curious
This story is going to be less good than it could be, but I need to protect anonymity.
I used to work for a smart beta startup. The strategy was so simple that we put a brief summary on our business cards, and even the boss' secretary had it down cold. We got bought by a large firm (think $100B+ AUM, 1K+ employees) and they hire somebody to build out the product line in this field, assuming they're seriously experienced, given the resume. We're talking C-suite level, direct report to the President and CEO, and one of about a dozen people on the executive committee, along with the heads of distribution, finance, etc.
About three months into the job this person goes on live TV and royally screws up the basic investment thesis which can be summed up in one sentence of less than ten syllables. Thankfully it was B-level investment TV, and the AUM in the strategy was small at the time, but we were still playing defense for months.
I had a someone interviewing for a credit analyst position here that didn't know what we did at all (thought we were merchant cash advances and not loans), and didn't know what EBITDA was.
During my time at a boutique that had a few $1B+ transactions, 1st year Analyst didn't understand that the balance sheet had to balance--we used to ask him if his favorite shoes were No Balance.
One of my interns came up to me on his first day and asked "hey man how do you add two numbers in excel?"
Needless to say it was some clients nephew or some shit.
I was interning at a LatAm focused Wealth Management shop over the summer. Got a task to send out a memo to clients of the news that the S&P had surpassed its highest price ever ( each client had a net worth of 50 M+ ). I received about 10 emails from clients asking what the S&P was because they had no idea what I was talking about.
que? jajajaj
An analyst at one of the top RX shops argued for 30 minutes that the cost of debt is higher than the cost of equity.
...Have you checked Tesla lately?
When I was at a LMM / MM boutique one of the MD's I worked with didn't really know how to use a computer. For one, he didn't know how to navigate files on a computer outside of those on his desktop. He kept paper files of everything that filled up his office and the office next to him. On top of that he didn't know how to use the printer so I printed everything for him (e.g., all SPA draft, all CIM drafts, emails, etc.). If he was traveling and needed to look up something, he would get me to go through all of his paper files (which btw were not even alphabetized correctly) and find a copy or printout of the file he was searching for.
He wasn't really that old either (~45-50) he just never adapted to technology and would shovel everything he didn't want to learn onto the rest of the team. At the end of the day he founded the firm so he can do whatever he wanted and he knew M&A, but besides being annoyed at how ridiculous the situation was I was dumbfounded how he got so far never really adapting to using a computer.
Ran across a similar situation. A guy with a huge RE portfolio and he has his secretary print out emails, reply to them, etc... Pretty amazing he gets anything done.
I showed a VP at a previous employer Google Docs and Sheets. Mind was blown.
I even showed a team how to do conditional formatting in Excel. It got broken in a couple days because they kept hardcoding on top of my formulas, but it was interesting to see.
This doesn't scream incompetence to me, as much as someone who just isn't adapting to technology very well.
Harry Macklowe didn't need to understand how to send emails in order to envision the Apple Cube. Still a genius real estate play. Inefficient and incompetent are not the same thing. At least in real estate, one can do the job without ever sending a single email and still make tens of millions of dollars.
I've seen this from a GP I invested with in a past role. Unbelievable.
Building on this incompetent CFO trend, at a firm I interned at the CFO was bragging about spending two weeks cooped up at home adding up all kinds of account info manually and how much work it was. They had literally been going through what must have been thousands of rows of entries adding them up cell by cell.... Another intern explained the SUM function to her and she was not super happy.
I'll play.
I have a distant cousin that thinks Google is a cookie. And he owns a construction company.
Guy still goes to the brick and mortar bank everyday to get his acct balance.
this is incredible, +SB mate. cheers
Working on a forecast during the sale of a LMM business. CFO sends back a projected balance sheet - alone. Call the CFO to ask if he could also send the projected income statement - his response was "yeah I'm going to do that one next."
Have, multiple times, had to explain the basic concept of getting from enterprise value to equity value (and vice versa) to my MD. Had a solid 10 minute back and forth with him when he put DFCF equity value in draft transaction documentation.
Overheard an MD ask a VP what RWA meant.
I'm sorry, but what is "RWA?" Google only got me the 'Romance Writers of America' and I have no other clue.
(EDIT: Apparently the Romance Writers had some sort of big scandal last year, but I wasn't interested enough to read into it.)
Risk weighted assets
Some of the above really made me feel better.
Some people are incompetent, then there are those maestros who take incompetence and make it an artform.
Adding up each cell after cell and not knowing the =sum function? Mind blown.
CEO at my first internship: What is COGS
Me: Cost of goods sold..
CEO at my first internship: What is that?
Me (thinking): This place is doomed
It was a small VC/accelerator shop but ffs this is basic stuff.
Back when I was working in a MM M&A boutique my senior associate asked me, multiple times, what’s the difference between revenue and net profit and how to get to EBITDA. MD adored her for some reason.
"her" "for some reason" "analyst" "MD"
A few months in, new juniors are pretty fluent at the basics and we've given them all a little project to see which ones have some quant ability. They had a few days market data for one instrument, had a few weeks to script a strategy to trade the instrument, we let them assume they would successfully fill any trades going any volume that showed on the order book.
At the end we come over, one kid seems especially sprout compared to the other juniors. Tells us he worked really hard, had good results from the get go but spent ages tweaking it to make it even better. His algo made tonnes of cash on every day of the data we gave him. We look at his code for one minute - he's been buying at the bid price and selling at the ask price.
So... did he get the return offer?
This was actually a full time position, the company only started doing internships a year or two later. He had done well at the other parts of the program so he wasn't totally screwed. He kept his job and to my knowledge is still there a few years later, doing fine I presume.
that's lowkey brilliant given the parameters of the assignment.
can you explain what this means in terms of the assignment? trying to learn
The assignment involved taking as input raw market data from a certain exchange, they continually send you trade ticks, orderbook updates and some other messages. In case you are unfamiliar with this level of data, take a look at e.g. https://www.btcmarkets.net/buy-sell . You can see the orderbook (prices and volumes that people are willing to buy or sell at) and the trade ticks (prices and volumes of the trades that have actually gone through).
The assignment was to process this stream of data and somehow decide what trades you would want to make, and you can assume that whatever orders are available in the orderbook you can actually do that trade. E.g. Say you've been observing this data and the trades going through in the market convinces you that you'd like to buy for $50.00. Suppose the orderbook shows you that 10 lots are available at ask price $50.00, then you can log into your backtest that you were able to get 10 lots at $50.00. This is obviously highly unrealistic because your order may not get to the exchange before all your competitors, or that volume you see in that instant may be cancelled by the time anyone's trade for it reached the exchange. Regardless, this is a good exercise for a junior quant.
EDIT: And just in case I need to clarify - If you want to take liquidity from the orderbook, you can only buy at the ask price and sell at the bids. lol
I've been following politics my entire life.
The Trump White House is the most shocking level of incompetence I've ever seen in a workplace, both from the level of incompetence to the impact that incompetence has on the world.
I love too that no one actually steps up to defend the Trump White House as a high functioning workplace.
I posted that 4 days ago. The stark incompetence, and the obvious negative affects of it, has only become more obvious in the face of an international crisis.
First time in a long time an administration said fuck you to the corporate world and forced companies to bring back jobs to the US by imposing trade penalties and increasing labor cost abroad.
First administration that didn't go into a new war blowing up shit up in the middle east and fucking everyone in the process and costing the US tax payer some more money at the expense of worsening international relations.
An administration that has started to bring back the level of salary for lower America and standard of living.
It takes time to get the right team in place - unfortunately Trump didn't get to "hire slow, fire fast". On day one he had to hire fast, but he fires fast and that's why he is numero uno. That's why he is going to crush Biden next election. That's why the US is started to be respected once again abroad (despite the bull shit you might hear in US medias) - I live in Europe and we fucking love the man, he does polarize people and your usual metropolitan elite doesn't take well to an outsider, but the middle and lower class like him.
Long live the Trump.
This is all comically incorrect.
Tariffs didn't force anything except a bailout that Trump had to give to farmers hurt by his policies.
Trump literally assassinated someone in the middle east with a missile strike and then lied and then downplayed the impact to US troops from Iran's response.
Salaries and standard of living in the US are still not keeping up with inflation. Meanwhile, Trump inherited a strong economy coming out of the great recession that is now tanking.
Trump is polling behind Biden
I'm from abroad and I can tell you that my family, other families I know, friends, friends of friends and myself do not respect the US
This is why normal people despise people like you.
What a worthless first post.
"Normal" is not a synonym for "conservative" and incompetence is not something conservatives inherently embrace or embody enough to "despise" me for pointing it out.
I think the reason this wasn't received well was that this thread contained personal stories of things that happened in people's own workplaces, and the level of stupidity was often funny to think about after the fact. You talked about something that wasn't your own workplace, and Trump's incompetence isn't really funny, it's disheartening. So in essence you posted a political issue in a lighthearted thread, and while what you said is not technically wrong, it's out of place
Small RE developer. #2 guy at the company loves doing mental math out loud and getting the numbers completely wrong. No one proceeds to correct him...
That's so awesome. Maybe he was doing it to punk everyone else.
"What was that you say? House is 20 ft x 100 ft? Is that.... one milllion square feet?" "What was that? Divide 1,356 by 3? The answer is.... 4.8 of course. Duh"
Don’t forget “slap a 5 cap on it”
Not this egregious, but painfully close
My old MD believes EBITDA is the same as Net Profit.
Current coworker is certain that Cash from Operations = Net Profit
I had solid 15 mins argument with one of our client CFO that Land DOES NOT DEPRECIATE in value.
Also one client wanted to depreciate his building to salvage value because he needed the deduction to not pay taxes.
Fact does indeed stranger than fiction...
What business was the CFO in? In some specific instances land is depreciable.
Are you thinking of depletion?
Land is never depreciable.
Was he successful in depreciating it to salvage?
My current shop is run by 4 principals. 3 are directly involved in investment management. 2 of them are "fixed income PM's". The last one is an equities PM. All self-proclaimed. None of them know how to read financial statements. None of them know how to effectively use Bloomberg. None of them have an advanced degree or respectable certifications/charters. None of them have institutional fundamental/technical training. None of them perform actual research on their name or the investment landscape. Fixed income PMs can't perform credit analysis even if given a credit report from sell-side. Fixed income PMs buy bonds according to spread over the 10 Yr, investment grade or not, and "you know, it is just a great American name". Equity PM doesn't know the names we own, much less what the companies do. Equity PM doesn't know equity risk premium or how to trade options. Equity PM sees an upwards trending graph and that is the thesis to "buy".
Equity PM gave himself a $100K bonus for 2019. All principals earn $800K+ pre-tax per annum.
no disrespect, but how the fuck is your shop still in business?
You have no idea how dumb rich people can be.
Who did you raise money from??
people who do well in other industries, but are an absolute monkey when it comes to finance
Can I join? I would like to earn $800k++. I promise to never do any research and will only momentum buy. Promise.
You sound like you deserve a senior executive position here.
Who the fuck are the LPs ? How did they ever raise assets lmao
You'd be surprised by the lack of knowledge people have.
Company I cover just reported; didn't give great numbers. We have it rated a Buy, asked the head of our department/my analyst what this company would need to do to move to a hold (should have been one already).
He said "If I think it'll go to zero, I'll move it to a hold'
That's a sell, brother.
Not so much incompetence but the industry
and they say research doesn't add value....
In your case it might be different, everyone knows sell-side equity research is just the attraction for IBD business anyways. Unless you are a research only shop.
Perhaps they have a brighter party over the wall. When that ends, it'll become a hold.
First year analyst right clicked to copy and paste
MD does the same. I get you don’t need to be an Excel wizard to go far in this industry, but come on how do you not know Control + C and Control + V?
my md types with ONLY with his two index fingers and abbreviates EVERYTHING - even his OWN NAME
br, intn
Someone hired me. Kidding kidding
Strategy&:
One director believed that his client (a buy-side shop) was doing well as their AUM was up 3% YOY. Equity markets rose 30% the year prior so they were actually LOSING clients. Said director failed to understand that fact.
Another director asked me what an ETF was.
A manager did not know the difference between the buy-side and sell-side. This manager also believed that companies named "X Capital Management" were different from companies named "X Investment Management" merely because of the difference in "Capital" vs. "Investment" in the name
All in the Financial Services practice. They bill out their "expertise" at $350+ an hour.
Please tell me you´re joking, I can´t bear share an association with these guys...
Second year at a pwm shop a guy who has been in the business 30+ years asked me what the difference between a call and a put was because "You just took the licensing rest, right?".
Also most of these guys didn't understand what the expense ratio of a fund is, just basic stuff like that. A lot of the "it's a great American company" type "investments".
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