THE ADD-BACK · episode 08
SightingA portfolio company has spent four hundred thousand on advisory work across three firms. There is a maturity assessment, an opportunity register, a roadmap and an implementation plan. Nothing has been funded and nothing has been killed.
The consensus readAnalysis paralysis. A leadership problem.
The mechanismIt's a specification problem. None of those four deliverables was ever required to name which option gets capital and which one stops. They were scoped to describe a situation, and a description cannot terminate an argument — it just gives both sides better material.
The exposureYou didn't buy a decision and then fail to make it. You bought four documents that were never capable of producing one.
The testTake the last five ops deliverables you paid for and ask which named a thing that stopped. If it's zero, the money bought analysis and the decision is still unfunded.
Decision-grade
A deliverable that names what gets funded, what gets killed, and what evidence would have reversed the call. Everything else is analysis-grade.
The test. Three parts, all must pass. Is there a named recommendation with a disposition, not a ranked list? Is there something explicitly not being done? Is the falsifier written down — the finding that would have flipped it? Fail any one and it's analysis-grade, however good it is.
The advisory spend and deliverable set are a composite. Macaulay and Staw are real, published and cited with their samples; the decision-grade cost comparison is our estimate and flagged as such.
| Line | Moves | Running |
|---|---|---|
| Claimed — $400,000 of advisory spend producing a decision on an AI-native operating redesign | $400,000 | |
| 1. What each deliverable actually terminates Walk them. Maturity assessment: positions the company on a scale against peers, terminates nothing — a score is compatible with any subsequent action, which is why it is safe to produce. Opportunity register: twenty-odd initiatives, sized and ranked; feels like a decision because it has numbers and is the most reliably useless of the four, because a ranked list moves the decision downstream intact — somebody still has to say no to items four through twenty and nobody in the document did. Roadmap: sequences the register, and sequencing assumes the funding decision was already made, so the roadmap is downstream of a decision nobody took — which is why roadmaps get rebuilt every two quarters. Implementation plan: presupposes all three above. Not one contains a sentence of the form 'this option is not being pursued, for this reason, and here is what would have changed our answer'. Four hundred thousand dollars of genuinely competent work, none of it decision-grade. | −$400,000 | $400,000 spent, $0 of decision purchased |
| 2. Why analysis-grade dominates changes the story Two forces, and neither is anyone acting badly. It's safer to supply: a decision-grade deliverable makes a falsifiable claim with the provider's name on it, an analysis-grade one makes none — if the client later funds the wrong thing, the assessment was still accurate. Providers optimise for defensibility over time and the equilibrium is description. And scope-of-work mechanics produce it: advisory work is scoped and priced on effort — weeks, workstreams, interviews — while a decision-grade output is frequently shorter, which looks like less value for the same fee. The commercial structure of the engagement selects against the thing you wanted. Macaulay's 1963 study found businessmen frequently don't plan exchange relationships completely and seldom use legal sanctions to settle disputes; planning is used when gains are thought to outweigh costs, and the decision whether to formalise is made by whoever's occupational role bears the exposure. Same structure: the party who bears the cost of an indecisive deliverable is not the party who scopes it. | −$0 | $400,000 spent, $0 of decision purchased |
| 3. The third test is the one that gets dropped changes the story Of the three parts of the term's test, the first two are easy to demand and get. The falsifier — what evidence would have reversed the call — is the one nobody writes, and it is the one that makes the other two worth anything. Without it you cannot distinguish a recommendation from a preference; both look identical on the page. Six months later, when the situation has moved, you cannot tell whether the call still holds because you never recorded the conditions it depended on — so the work has to be redone, which is why funds buy the same assessment twice. With it you get something that behaves like an asset: a dated claim with a stated dependency, which can be checked. That is the difference between a deliverable and a residual, and it is the property that lets a second portfolio company reuse the first one's work rather than commissioning it again. Demanding the falsifier costs nothing at scoping time and is nearly impossible to add afterwards. | −$0 | $400,000 spent, $0 of decision purchased |
| 4. Where I was wrong — I thought the fix was a better spec where I was wrong My recommendation was to fix the scope of work: require a named disposition, an explicit exclusion and a written falsifier in every ops deliverable over a threshold. Cheap, obvious, and I was confident. It addresses the document and not the reading. Staw establishes that people commit the most additional resources to a failing course when they were personally responsible for the original decision — roughly 75% of responsible subjects sought retrospective justifying information against about 25% of those not responsible. A decision-grade deliverable read by the person who sponsored the initiative is analysis-grade in effect: the recommendation gets received, the exclusion gets characterised as 'phase two', the falsifier gets read as a condition not yet met, and more data is commissioned — which is the measured escalation response, not diligence. What it cost: The specification is necessary and insufficient. The addition: a decision-grade deliverable has to be presented by, or at minimum read against, someone with no position in the original initiative. That is a governance line, it costs nothing, and it is the only part of this that changes outcomes. I specified the artifact when the binding variable was the reader. | −$0 | $400,000 spent, $0 of decision purchased |
| 5. What decision-grade costs residual The uncomfortable commercial fact, stated because it is the reason this is a hard sell in both directions. A decision-grade engagement is usually smaller, shorter and cheaper than the analysis-grade equivalent, because most of the effort in a large advisory engagement goes into breadth — covering the option space so no criticism lands. Terminating a decision requires depth on two or three options and the discipline to exclude the rest. Which means the buyer's procurement instinct — more weeks, more coverage, lower risk — reliably selects the deliverable that cannot decide anything, and the provider has no incentive to correct them. | +$0 | $400,000 spent, $0 of decision purchased |
| Realised | $400,000 of analysis-grade work against roughly $60,000 to $120,000 of decision-grade work that would have terminated the same question |
The difference is scope breadth nobody needed.
Value at risk · multiple 9x, illustrative
Direct: $400,000 of spend producing no disposition; at an illustrative 9x on a recurring advisory line that is meaningful on its own, but it is the smaller number. The real exposure is time on the lock-in clock from Episode 06 — six months of indecision on a live programme runs $90,000–$150,000 of additional lock-in. Substitute your own comps.
The fee plus the decay it failed to stop — $90,000 to $150,000 of additional lock-in per six months of indecision
When it surfaces. At the next review, as the same question with better slides. The tell is a portfolio company that has commissioned two assessments of the same problem eighteen months apart — that is not thoroughness, it is evidence the first one was analysis-grade and nobody said so.
THE ADD-BACK · episode 08 · diligence pack
Artifact: One line in the scope of work.
If it can't be written, the engagement has no decision in it and should be repriced as research.
Artifact: A named exclusion in the document.
A deliverable with no exclusions has not chosen.
Artifact: One paragraph.
The item that converts the deliverable into something reusable.
Artifact: A name in the engagement letter.
Per Line 4, the binding variable is the reader.
Artifact: A one-line answer per deliverable.
This is the baseline, and it is usually the most persuasive document in the conversation.
Disqualifier
If a provider resists item 3, that is informative rather than obstructive. A falsifier is a commitment to being checkable, and reluctance to supply one tells you what class of deliverable you were about to buy.
| Claim | Source | Sample | Class |
|---|---|---|---|
| Businessmen frequently don't plan exchange relationships completely and seldom use legal sanctions to settle disputes; planning is used when gains are thought to outweigh costs | Macaulay, American Sociological Review 28(1), 1963 | Interview and questionnaire study of Wisconsin businessmen and lawyers | measured |
| ~75% of subjects responsible for a prior failure sought retrospective justifying information, against ~25% of those not responsible | Staw, escalating commitment literature (1976 onward) | Experimental subjects; responsibility manipulated | measured |
| $400,000 advisory spend across three firms producing four deliverables and no disposition | Composite | n/a — composite | composite |
| Decision-grade equivalent at roughly $60,000–$120,000 | Our estimate, exposed so it can be substituted | n/a — illustrative | illustrative |
One standing caveat. Every number in this show is somebody else's measurement, and I'll tell you whose, with the sample. None of it is diligence on your deal. Do that yourself.