La Bourse / Volume I / Nº I.02 / Quiz, reflection, essays

A woman seated among cream linen with two open books, reading, soft light from the window at her left. — Plate I.02 · Quiz, reflection, essaysThe Inventory.An inventory is not a list of what you have. It is the discovery of what you have been using without noticing.

ASSESSMENT · Chapter I.02 — Where You Already Stand

THE QUIZ — ten points

Four on recall.

1. Write the counterfactual value expression and say which of its terms appears in a standard management account.

V = (C_alternative − C_actual) + R_captured + O_option. Only C_actual has a line — and it is the one that looks like a cost. One mark for the expression, one for identifying that three of four terms are invisible.

2. State the trend test and what each of its three outcomes means.

R(t+1) > R(t) regeneration; = maintenance; < liquidation — a cost being reported as a saving.

3. Name the six places the chapter says to look.

Maintenance programmes; retention anomalies; protected suppliers; diverted waste streams; redirected spend; and the decision that was declined.

4. What does the chapter say is the single reason regenerative practice is under-adopted?

The accounting shows the cost and hides the return, so people respond rationally to what they can see. Full marks require the second half — that the behaviour is rational, not ideological.

Four on application.

5. A colleague presents a finding: "Our maintenance programme saves £50,000 a year in avoided replacement." What two questions do you ask?

First: is the stock rising, flat or falling — i.e. what is the condition trend? Second: was the replacement genuinely imminent, or is this a deferral rather than an avoidance? Credit any answer that gets both the trend test and the deferral correction.

6. Your organisation has eleven branches. One has notably better customer retention. How should you establish what it is worth, and what should you avoid?

Use the other ten as a control group — this is an observed comparison, not a modelled one. Avoid building a model when a natural experiment is available. The stronger answer notes that the comparison also has to control for anything structurally different about that branch — catchment, tenure, mix.

7. A procurement review recommends re-tendering a long-standing supplier on price. What is missing from the analysis, and how do you present it?

The option value: out-of-hours response, held stock, early warning, rush capacity without renegotiation. Present it by naming it with evidence of use, and if a number is required, quote the market cost of the substitute as an explicit floor rather than a valuation.

8. Why does the chapter insist the inventory not be delegated to a junior researcher?

Because its value is concentrated in the conversations with practice owners, and those conversations only yield their real content when the asker has the standing to act. The exercise is cheap in hours and expensive in authority.

Two that require the arithmetic to be done.

9. A press costs £400,000 to replace on an eight-year cycle. A rebuild programme costs £22,000 a year. If the replacement would in fact have been deferred three years anyway, what is the honest annual value of the programme at a 9 percent discount rate? Show your working.

Naive: 400,000/8 − 22,000 = £28,000/yr. Honest: the benefit is a three-year deferral of £400,000. 400,000 − 400,000/(1.09)³ = 400,000 − 308,900 ≈ £91,100 once, ≈ £11,400 a year over the eight-year cycle — before subtracting the £22,000 cost, at which point the programme may not clear at all on this assumption. The point of the question is that the assumption, not the arithmetic, decides the answer — which is why both cases must be shown.

10. A retention practice is worth £1.17 million a year in one unit. There are six comparable units. Documenting and teaching it costs £40,000. At 30 percent transfer effectiveness, what is the return?

1,170,000 × 6 × 0.30 = £2,106,000 a year against a £40,000 one-off — a return of roughly fifty-three times in the first year. Credit any answer that also flags the load-bearing assumption: that the other six units are genuinely comparable, and that 30 percent is a guess which should be tested on one unit before being claimed for six.

REFLECTION — eight questions, for one person and a pen

What do you do in your own work that you would describe as "just how I do it" — and if you had to teach it to someone on Monday, what would you actually say?

Think of something valuable in your organisation that was nearly cut. Who protected it, and what did they know that the proposal did not?

Where have you said "we've always done that" about something you have never costed?

Who has told you something important about how this place really works, that you have never written down? Write it down now, while you remember it.

What have you refused to do, professionally, that turned out to be right? What were you seeing that others were not?

Whose quiet practice in your organisation has never been acknowledged — and what has stopped you being the one to acknowledge it?

Where are you currently improving a number by drawing down something you will need later? Answer about your own capacity before you answer about the business.

If you left in a year, what would stop working, and does anyone else know it?

ESSAY PROMPTS — five

1. The accounting explanation for under-adoption. The chapter argues that regenerative practice is under-adopted because the accounts show the cost and hide the return — not because of ideology or short-termism. Argue for or against this as a sufficient explanation. Use the chapter's counterfactual expression, and at least one source on management accounting or capital budgeting that the chapter does not cite.

2. Tacit knowledge and the limits of documentation. Polanyi holds that we know more than we can tell. If that is true, what happens when an organisation attempts to document its tacit practices — is the documented version the practice, a degraded proxy for it, or something new? Engage Polanyi and Nonaka and Takeuchi directly, and take a position on whether the chapter's "write it down" instruction is sound.

3. The natural experiment, and its limits. The chapter recommends using comparable sites as a control group rather than modelling a counterfactual. Argue the case against: selection effects, unobserved differences, the reasons the good site may be good that have nothing to do with the practice. Use at least one source on quasi-experimental method that the chapter does not cite, and conclude with what you would actually do.

4. The Preston case at ten years. Community wealth building has been both celebrated and criticised. Write the strongest case that redirected anchor procurement produces durable local benefit, then the strongest case that it redistributes activity without creating it. Manley and Whyman is the starting point; find at least one critical evaluation.

5. Whether option value should be priced. The chapter rules: name it, do not monetise it, and if pressed give a market floor. Argue the opposite — that refusing to price optionality guarantees it is weighted at zero in any decision that comes down to a spreadsheet, and that an imperfect number beats an eloquent sentence. Use the chapter's supplier example and one source on real options or decision analysis that it does not cite.