Thirteenth law of worker entropy: Difference between revisions

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{{Quote|“Je n’ai fait celle-ci plus longue que parce que je n’ai pas eu le loisir de la faire plus courte.”<ref>“I have made this longer than usual because I have not had time to make it shorter.”</ref>
{{image|William Blake, painter and poet (page 28a)|png|}}
}}{{Quote|“Je n’ai fait celle-ci plus longue que parce que je n’ai pas eu le loisir de la faire plus courte.”<ref>“I have made this longer than usual because I have not had time to make it shorter.”</ref>
— Pascal, ''Lettres Provinciales'', 1657.}}{{Thirteenth law of worker entropy}}
— Pascal, ''Lettres Provinciales'', 1657.}}{{Thirteenth law of worker entropy}}


The JC developed this over a series of papers ''[Don’t you mean “beers”? — Ed]'' with sometime collaborator, poet, playwright and tropical disease victim Otto {{buchstein}} when trying to understand how [[medium term note]] documentation could be so dreary despite (a) the underlying product being basically straightforward and (b) repeated efforts by market participants to make it easier.<ref>For example, the  [https://patents.google.com/patent/EP1597650A2/en patent applied for] “'''MaJoR'''” Multi-Jurisdiction Repackaging Programme, which for a brief beautiful moment revolutionised the repack world, but inexplicably fell out of favour, to be replaced by earlier, crappier structures. Go figure. </ref>
The JC developed this over a series of papers ''[do you mean “beers”? — Ed]'' with sometime collaborator, poet, playwright and tropical disease victim Otto {{buchstein}} when trying to understand how [[medium term note]] documentation could be so dreary despite (a) the underlying product being basically straightforward and (b) repeated efforts over the years by market participants to make it easier.  


There are underlying dynamics here.  
There are underlying dynamics here.  


Firstly, ''r'' and ''t'' are positively correlated. This follows: the more patience, skill and hubris required to competently manipulate text, the fewer people can do it. So, by operation of ordinary principles of supply and demand, the more those who ''can'' do it can charge. Hence the charge-out rate tends to rise, not fall, with prolixity.
Firstly, that [[charge-out rate]] “''r''and the time “''t''” it takes the fellow charging it to do a basic task are ''positively'' correlated. This may seem counterintuitive, but in the twisted logic of legal practice, it follows: the more patience, skill and hubris required to competently manipulate text, the fewer people can do it and, by ordinary principles of supply and demand, the more they can charge.  


Similarly, ''v'' is actual, real world value, and not “notional fright value imbued by lawyers”.  
Hence, ''pace'' Blaise Pascal, [[charge-out rate]]<nowiki/>s tends to rise, not fall, with prolixity: only a true lexical wizard has a hope of understanding ISDA’s latest publications.


Thus, a [[Medium term note|secured medium term note]] — typically in the tens of hundreds of millions of dollars — has high intrinsic value even though the basic premise of the transaction — “I lend you money, you give me a note, I can sell it, you repay whoever holds it later, with interest, depending on certain externalities” — is pretty simple. Thus, you can expect the documentation for a secured MTN drawdown to span several hundred pages of wretched text, and so it does, notwithstanding that one can, and parties typically do, trade on a one-page [[Cocktail napkin|term-sheet]].
Similarly, “''v''” is actual, real-world value, and not “notional fright-value imbued by the neurotic expostulations of paranoid lawyers”. “''v<sub>f</sub>'' ” is a kind of bounded lexo-cosmological constant.


By contrast, a [[confidentiality agreement]] is part of the traditional pre-trade appendage-measuring ritual of the pea-cocks and pea-hens of finance. You ''have'' to do it, it is meant to ''look'' spectacular, but no-one is meant to be seriously ''hurt'' by the experience, and nothing of lasting value is achieved by its negotiation. Even so, the abstract ''legal'' points of an NDA can be quite involved the world is awash with misconceived NDA templates riddled with schoolboy errors — even though nothing of any commercial moment has ever depended on them.  
===== [[MTN programme|MTN programmes]] =====
Thus, a [[Medium term note|secured medium term note]] — having a principal amount typically in the tens or hundreds of millions of dollars  — has high intrinsic “''v''” value even though the basic premise of a transaction — “I lend you money, you give me a an [[IOU]], I can sell it, you repay whoever gives it back to you at maturity, with interest, depending on certain externalities” — is simple.  


Thus, [[Confidentiality agreement|NDA]]<nowiki/>s even for secret-squirrel event-driven [[family office]] types — rarely get past 5 or 6 pages. If you get stuck on one for more than a week, it is bound to be some other problem the business guys don’t want to face, so are blaming on the NDA.
Thus, you can expect the documentation for a bond deal to say very little, but say it expansively, over several hundred pages of wretched text. And so it does, notwithstanding that one can, and parties typically do, trade on a one-page [[Cocktail napkin|term-sheet]].
 
===== [[Netting opinion|Netting opinions]] =====
[[Netting opinion|Netting opinions]] are the same: there has not been an insolvency practitioner alive in the last forty years who  for an instant has so much as ''considered'' challenging the “[[Single Agreement - ISDA Provision|single agreement]]” concept of an {{Isdama}}, let alone successfully done so.  Yet, so ghastly are the dread phantoms that circle the head of anyone foolish enough to ask that plainly stupid question ''what if one of them did?'' — and so comfortable are the incomes of those brave toilers engaged in the annual harvest of prophylactic [[Netting opinion|opinions]] giving supplying the sober, long-winded answer that so preposterous a question barely deserves — that the industry tolerates a multi-million dollar annual expenditure without second thought.
 
===== [[NDA|NDAs]] =====
By contrast, a [[confidentiality agreement]] is part of the traditional pre-trade appendage-measuring ritual of the pea-cocks and pea-hens of finance. You ''have'' to do this; NDAs are meant to ''look'' fierce, but no-one is ever seriously ''hurt'' by them, and nor does anyone achieve much of lasting value out of them either. They’re a comfy part of the cosmic pantomime that is a career in financial services. But no-one wants to ''pay'' for them.
 
Even so, the abstract ''legal'' points of an NDA can be intricate — the world is awash with NDA templates riddled with schoolboy errors — though, since nothing of any commercial moment has ever depended on an NDA, the howlers persist: the people — and [[Machines are fungible|machines]] — engaged to process them need, and usually have, no great acumen, so we should not expect anything else. 
 
So there are local maxima and minima at play. An [[NDA]], however important, complicated, and regardless of what fanciful things you bolt onto it ([[Exclusive licence|exclusivity]], [[non-solicitation]], restraint of trade, [[Exemplary damages|punitive damages]] and so on) may generate a few thousand pounds in billings, but even that is pushing beyond rational expectation.
 
With a syndicated bond issue, on the other hand, you can write a ticket to the moon.
 
This is why [[magic circle law firm]]s do not have “confidentiality departments”  — everyone muddles along as best they can — but devote entire floors to [[Debt securities|debt capital markets]].


===Worked example===
===Worked example===
Take a USD500m loan. Even 0.05% of the deal value — as mere 5 [[basis point]]<nowiki/>s is USD250,000. Is it any wonder the service economy is in such rude health? Who ''wouldn’t'' pay that to make sure nothing went wrong on half a yard of debt finance?  
Take a USD500m note. Even a half of one percent of the deal value — a mere 5 [[basis point]]s” adds up to USD250,000. Who ''wouldn’t'' pay such a paltry sliver to make sure nothing went wrong on half a yard of debt finance?  
 
But even at a charge-out rate of USD500 an hour, that is ''five full working weeks'' of a [[legal eagle]]’s time:<ref>At 40 hours per week. Yes, we know that nowadays a transatlantic lawyer can expect to recover more billable hours per week than there actually are in the week, but we are assuming traditional laws of spacetime apply.</ref> it really wouldn’t do if all that was required was to top-and-tail the term-sheet and bang out an enforceability [[Legal opinion|opinion]]. Nor would there be much prospect of stopping clients going to some other guy down the road who will do the job in a day and send a bill for a £500. ''So somehow we need to make this seem a bit more complicated''.
 
Still: is it ''really'' possible to charge six figures for a glorified [[IOU]]? Well, have a butcher’s at this [https://www.ise.ie/debt_documents/ListingParticulars_cd8daa3f-24e8-419a-819a-cf3e23a03271.PDF this 370-page beauty] and allow me to rest my case on it, since it plainly wouldn’t fit ''in'' it. Quarter of a mill well spent, sans doubte.<ref>We have NO idea how much the legal fees on this were, and it may be wildly defamatory to imply it was that much. Of course it could have been more.</ref>


But even at USD500 an hour, that is ''five full working weeks'' of a [[legal eagle]]’s time:<ref>At 40 hours per week. Yes, we know that nowadays a transatlantic lawyer can expect to recover more billable hours per week than there actually are in the week, but we are assuming traditional laws of spacetime apply.</ref> it really wouldn’t do if all that was required was to top-and-tail the term-sheet with [[boilerplate]] and bang out an enforceability [[Legal opinion|opinion]]. Nor would there be much prospect of stopping clients going to some other guy down the road who will do the job in a day and send a bill for a £500. So —
Is it any wonder the service economy is in such rude health? 


{{sa}}
{{sa}}
*[[charge-out rate]]
*[[charge-out rate]]
*[[Time and attendances]]
*[[Time and attendance]]
*[[Laws of worker entropy]]
*[[Laws of worker entropy]]
{{C|Laws of worker entropy}}
{{C|Laws of worker entropy}}
{{ref}}
{{ref}}
<references />

Latest revision as of 19:07, 15 September 2022

Office anthropology™


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“Je n’ai fait celle-ci plus longue que parce que je n’ai pas eu le loisir de la faire plus courte.”[1]

— Pascal, Lettres Provinciales, 1657.

The JC’s thirteenth law of worker entropy (also known as the “optimal complication theorem”): Over time, a given template will tend to a point of “optimal” complication, (c), which is a function of:

(i) the highest plausibly chargeable fraction of the typical value, (vf), of contracts concluded on the template,
(ii) the time, (t), required to manipulate the template so it reliably works to the satisfaction of one having the patience, skill and hubris to understand it, and
(iii) the professional charge-out rate, (r), of such an unusually abled person.

The relationship between c, vf, t and r is as follows: c ↔ vf = tr.

The JC developed this over a series of papers [do you mean “beers”? — Ed] with sometime collaborator, poet, playwright and tropical disease victim Otto Büchstein when trying to understand how medium term note documentation could be so dreary despite (a) the underlying product being basically straightforward and (b) repeated efforts over the years by market participants to make it easier.

There are underlying dynamics here.

Firstly, that charge-out rater” and the time “t” it takes the fellow charging it to do a basic task are positively correlated. This may seem counterintuitive, but in the twisted logic of legal practice, it follows: the more patience, skill and hubris required to competently manipulate text, the fewer people can do it and, by ordinary principles of supply and demand, the more they can charge.

Hence, pace Blaise Pascal, charge-out rates tends to rise, not fall, with prolixity: only a true lexical wizard has a hope of understanding ISDA’s latest publications.

Similarly, “v” is actual, real-world value, and not “notional fright-value imbued by the neurotic expostulations of paranoid lawyers”. “vf ” is a kind of bounded lexo-cosmological constant.

MTN programmes

Thus, a secured medium term note — having a principal amount typically in the tens or hundreds of millions of dollars — has high intrinsic “v” value even though the basic premise of a transaction — “I lend you money, you give me a an IOU, I can sell it, you repay whoever gives it back to you at maturity, with interest, depending on certain externalities” — is simple.

Thus, you can expect the documentation for a bond deal to say very little, but say it expansively, over several hundred pages of wretched text. And so it does, notwithstanding that one can, and parties typically do, trade on a one-page term-sheet.

Netting opinions

Netting opinions are the same: there has not been an insolvency practitioner alive in the last forty years who for an instant has so much as considered challenging the “single agreement” concept of an ISDA Master Agreement, let alone successfully done so. Yet, so ghastly are the dread phantoms that circle the head of anyone foolish enough to ask that plainly stupid question — what if one of them did? — and so comfortable are the incomes of those brave toilers engaged in the annual harvest of prophylactic opinions giving supplying the sober, long-winded answer that so preposterous a question barely deserves — that the industry tolerates a multi-million dollar annual expenditure without second thought.

NDAs

By contrast, a confidentiality agreement is part of the traditional pre-trade appendage-measuring ritual of the pea-cocks and pea-hens of finance. You have to do this; NDAs are meant to look fierce, but no-one is ever seriously hurt by them, and nor does anyone achieve much of lasting value out of them either. They’re a comfy part of the cosmic pantomime that is a career in financial services. But no-one wants to pay for them.

Even so, the abstract legal points of an NDA can be intricate — the world is awash with NDA templates riddled with schoolboy errors — though, since nothing of any commercial moment has ever depended on an NDA, the howlers persist: the people — and machines — engaged to process them need, and usually have, no great acumen, so we should not expect anything else.

So there are local maxima and minima at play. An NDA, however important, complicated, and regardless of what fanciful things you bolt onto it (exclusivity, non-solicitation, restraint of trade, punitive damages and so on) may generate a few thousand pounds in billings, but even that is pushing beyond rational expectation.

With a syndicated bond issue, on the other hand, you can write a ticket to the moon.

This is why magic circle law firms do not have “confidentiality departments” — everyone muddles along as best they can — but devote entire floors to debt capital markets.

Worked example

Take a USD500m note. Even a half of one percent of the deal value — a mere 5 “basis points” — adds up to USD250,000. Who wouldn’t pay such a paltry sliver to make sure nothing went wrong on half a yard of debt finance?

But even at a charge-out rate of USD500 an hour, that is five full working weeks of a legal eagle’s time:[2] it really wouldn’t do if all that was required was to top-and-tail the term-sheet and bang out an enforceability opinion. Nor would there be much prospect of stopping clients going to some other guy down the road who will do the job in a day and send a bill for a £500. So somehow we need to make this seem a bit more complicated.

Still: is it really possible to charge six figures for a glorified IOU? Well, have a butcher’s at this this 370-page beauty and allow me to rest my case on it, since it plainly wouldn’t fit in it. Quarter of a mill well spent, sans doubte.[3]

Is it any wonder the service economy is in such rude health?

See also

References

  1. “I have made this longer than usual because I have not had time to make it shorter.”
  2. At 40 hours per week. Yes, we know that nowadays a transatlantic lawyer can expect to recover more billable hours per week than there actually are in the week, but we are assuming traditional laws of spacetime apply.
  3. We have NO idea how much the legal fees on this were, and it may be wildly defamatory to imply it was that much. Of course it could have been more.