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MixedNuts comments on Bias in capital project decision making - Less Wrong

40 Post author: jsalvatier 26 May 2011 06:06PM

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Comment author: MixedNuts 27 May 2011 02:16:48PM 0 points [-]

They might also have lots of projects but not enough ressources for them all, so they have to select for high return rates.

Comment author: novalis 27 May 2011 02:35:09PM 1 point [-]

In this case, they could simply borrow more money.

Comment author: MixedNuts 27 May 2011 02:41:25PM 1 point [-]

There are sharper limits than you'd expect on how fast companies can grow. (Relevant: Ben & Jerry's vs Amazon: fast land grabs kill corporate culture, among other things; also that Robin Hanson(?) post I can't find about companies wanting to be bigger than they should.) You can borrow money, hiring is a bit harder, and assimilating new hires into your company just has to be slow, as well as restructuring management when everything gets bigger and you do more in parallel.

Comment author: jsalvatier 27 May 2011 06:01:43PM 0 points [-]

This was my first thought as well, which is why I started trying to think up creative ways firms could get more capital, including employee investment in particular projects. However, unless outsiders are extremely wary of industrial firms, these constraints should only apply when a firm is expanding its investment very very quickly, so high MARRs would only be a transient feature, not the norm.