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The problems with mergers

No nuts for you.

Tim Wu at the New Yorker wrote a piece about the all too predictable outcomes when United merged with Continental back in 2010.  There were sharp increases in fares in newly uncompetitive markets and a gradual decline in overall service.  I think the decline goes back even farther than that when United eliminated or sharply reduced pensions for flight crews and pilots back in the early naughties.  I remember distinctly the beaten down and depressed looks of the flight attendants on one of the flights I took from Philadelphia to Denver when I was on my way to a conference. When asked, the flight attendant made some remark to the effect that she had lost a lot in retirement benefits. It felt like we were hurtling towards Soviet era customer satisfaction with poorly compensated and indifferent flight attendants. Was this really what United wanted its customers to experience: a demoralized employee workforce, fewer services and a plethora of new fees, the profits from which were not going to the employee pension fund?

By the way, Tim, that ritualized abuse that you feel Americans are experiencing after the approved mergers of airlines and cable companies, for example?  I call it “exploitative profit mining”.

Then I saw that the New York Times Magazine was doing a big story on the lack of productivity in drug discovery (which I have been predicting for years now) and maybe it was time to go back to “trial and error”.  Now, I’m not going to say they’re wrong because we have tried proteomics, genomics, combinatorials, target based drug design, RNA interference and a whole lotta other “omics” type technologies and none of them have pulled off the “immaculate reception” to save the game that they promised to deliver.

But the thing that really made me laugh was the idea that any bean counter is going to let the R&D division go back to “trial and error”. My last impressions of the industry just before Pharmageddon was that “trials and errors” were distinctly money wasting activities. First, there was no metric that could be applied that could accurately determine exactly how many trials would be necessary to achieve the desired outcome. Secondly, there was the negative word “error”. Error implies failure, not a measurable objective, like a lead in the pipeline. To MBAs and the finance industry that now direct drug discovery research, it is important to minimize negative outcomes like errors, nevermind that it is the way the scientific method works and that we learn as much from error as success. Errors are the way we eliminate dead ends and turn our attention to more promising avenues. It’s how we work the kinks out of all those “-omics” technologies. Whatever. Executives would much prefer “predict and succeed”, which is theoretically a better use of time and money but rather less like science.

We might also try to eliminate the mergers and acquisitions of the drug companies by bigger drug companies, a trend that has interrupted project after project in the last two decades and caused the elimination of entire therapeutic areas. The increase in mergers occurred at the same time that biology is undergoing a 21st century scientific revolution. The finance industry’s unchecked enthusiasm for trading drug companies like baseball cards has blighted many promising new technologies and the careers of thousands of highly trained scientists, hence, no new blockbuster drugs. We probably do not need to conduct any additional trials and errors in merger experiments before we kill off the field entirely.

Just my non-MBA opinion but the lack of blockbuster drugs in the pipeline was entirely predictable fifteen years ago by those of us who experienced the joys of constant M&As. Maybe the bigger problem is that the MBAs never asked those of us in the trenches about the effect of mergers on productivity. Hmmm, one can only imagine why…

Derek Lowe and his insider commenters weigh in on the New York Times Magazine as well.

16 Responses

  1. Must go paint. Will no one rid me of these meddlesome dirty walls??

  2. LOL! That reminds me of the interminable painting that Lambert did for what seemed like two years. Every other post at Correntewire was about painting.

    • I remember that!

      • I kept thinking that his house was sprouting new rooms that always needed painting and that he was never going to finish. It must have been a thankless job. Rather like mine.

        • One of these days, we’ll have to paint this place. I’m not looking forward to it.

          … I’m trying to log into Microsoft. But, I’m getting conflicting messages about the right email address.

          Do you know if MS Office is still used in businesses? I’m thinking about becoming a certified professional.

          • You’re kidding, right? MS Office proficiency is like THE NUMBER ONE skill you have to have for any job these days. But the funny thing is, if you are older than 45, no one actually believes you possess these skills. If recruiters would simply ask you to take a test, they could determine how skilled you are but many of them just assume you wouldn’t know how to insert a table if it bit you in the ass.

            It’s fricking annoying.

          • That’s partly why I want to get certified. Especially with Excel. But I’m really good with the whole suite. I’m thinking that I might advertise my skills on Angie’s List. If I get certified.

          • I thought maybe people had moved onto some web app while my back was turned.

          • My recent experiences lead me to believe that resume screeners and hiring managers have a very provincial knowledge of office applications in general. For example, you may have plenty of experience with eRoom but if you have no experience with SharePoint, you don’t get a phone interview. That’s totally effed up. I just applied to a position where the unit uses COGNOS. I’ve never used COGNOS but I’ve used Spotfire. Heck, I’ve administered Spotfire. They’re similar data mining and visualization packages. If you get that whole relational database concept, then you should be able to apply that knowledge from one package to another with relatively little time on the learning curve. But that’s not the way HR departments roll these days. They see lack of experience with one package as a liability and may completely dismiss any underlying ability with the database landscape in general.
            So, what if you have COGNOS experience but you suck at it because you are only doing rote manipulations from a business POV and have never manipulated large datasets looking for unknown unknowns? Does this make you a more or less valuable potential employee? I only ask.
            Wait, I got totally off topic didn’t I?
            MS Office is still the standard as far as I know. And various email apps. Life Outlook vs Groupwise.
            Don’t even get me started. It’s infuriating.

          • I’m stalling. Must go paint.

          • Why does your description of HR staffers remind me of a confused fast food order taker frantically looking over the register pictograms when you order your meal without pickles?

            Is Outlook still a virus magnet?

  3. Finished the living room! Sort of. Still have to do a lot of trim. Only 4 more rooms to go.

  4. First, there was no metric that could be applied that could accurately determine exactly how many trials would be necessary to achieve the desired

    ” Where there is no vision, the people perish”

    Proverbs 29:18

    Obamacare adviser: Administration exploited “the stupidity of the American voter”


    Other videos stirring up controversy feature Gruber’s comments on the tax on so-called “Cadillac” heath care policies included as part of the ACA. Set to take effect in 2018, a 40 percent excise tax will be levied on health care plans exceeding $27,000 annually for family coverage and $10,200 for individuals. The aim is to attack the health care plans held by 20 percent of workers with employer-provided health care that are considered too “lavish,” i.e., those that provide decent coverage.

    Oh that sinfully lavish coverage! You know where you are facing an operation and your surgeon and the hospital are both approved! Lavish! I say ! Repent yee sinners!

    A friend of mine is having back surgery and the insurance company didn’t want him to spend one night at the hospital ..those fooken bastards

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